OIL AND NATURAL GAS PROPERTIES

2016 Acquisition

On September 12, 2016, Barnwell completed the acquisition of additional working interests in oil and natural gas properties located in the Wood River area of Alberta, Canada, for cash consideration. The sales price per the agreement was adjusted for customary purchase price adjustments to $769,000 in order to, among other things, reflect an economic effective date of September 1, 2016. The final determination of the customary adjustments to the purchase price has not yet been made however it is not expected to result in material adjustments.

The Wood River acquisition was accounted for under the acquisition method of accounting, and as such, Barnwell estimated the fair value of the acquired property as of the September 12, 2016 acquisition date. The following table summarizes the allocation of the consideration paid to acquire the properties to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 17 for further information regarding the fair value measurement inputs.



Property and equipment	$	813,000
Asset retirement obligation	(44,000		)
Net identifiable assets acquired	$	769,000

The results of operations for the Wood River acquisition has been included in the consolidated financial statements from the closing date. Pro forma information is not presented as the pro forma results would not be materially different from the information presented in the Consolidated Statement of Operations.

2015 Acquisitions

On November 13, 2014, Barnwell completed the acquisition of additional working interests in oil and natural gas properties located in the Progress area of Alberta, Canada, for cash consideration. The sales price per the agreement was adjusted for customary purchase price adjustments to $526,000 in order to, among other things, reflect an economic effective date of July 1, 2014.

The Progress acquisition was accounted for under the acquisition method of accounting, and as such, Barnwell estimated the fair value of the acquired property as of the November 13, 2014 acquisition date. The following table summarizes the allocation of the consideration paid to acquire the properties to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 17 for further information regarding the fair value measurement inputs.



Property and equipment	$	751,000
Asset retirement obligation	(225,000		)
Net identifiable assets acquired	$	526,000

On August 27, 2015, Barnwell completed the acquisition of additional working interests in oil and natural gas properties located in the Progress area of Alberta, Canada, for cash consideration. The sales price per the agreement was adjusted for customary purchase price adjustments to $306,000 in order to, among other things, reflect an economic effective date of June 1, 2015.

The Progress acquisition was accounted for under the acquisition method of accounting, and as such, Barnwell estimated the fair value of the acquired property as of the August 27, 2015 acquisition date. The following table summarizes the allocation of the consideration paid to acquire the properties to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 17 for further information regarding the fair value measurement inputs.



Property and equipment	$	397,000
Asset retirement obligation	(91,000		)
Net identifiable assets acquired	$	306,000

The results of operations for both of the Progress acquisitions have been included in the consolidated financial statements from the closing dates. Pro forma information is not presented as the pro forma results would not be materially different from the information presented in the Consolidated Statement of Operations.

2015 Disposition

Barnwell entered into a purchase and sale agreement with an independent third party and, in September 2015, sold its interests in its principal oil and natural gas properties located in the Dunvegan and Belloy areas of Alberta, Canada. The sales price per the agreement was adjusted for preliminary purchase price adjustments to approximately $21,875,000 in order to, among other things, reflect an economic effective date of April 1, 2015. Barnwell's share, after broker's fees and other closing costs, was approximately $14,162,000 and third parties', who were working interest owners in the properties prior to the sale, share, in the aggregate, was approximately $7,247,000.

The relationship between capitalized costs and proved reserves of the sold property and retained properties was significant as there was a 220% difference in capitalized costs divided by proved reserves if the gain was recorded versus the gain being credited against the full-cost pool. Accordingly, Barnwell recorded a gain on the sale of Dunvegan of $6,217,000 in the year ended September 30, 2015 in accordance with the guidance in Rule 4-10(c)(6)(i) of Regulation S-X, which requires an allocation of capitalized costs to the reserves sold and reserves retained on the basis of the relative fair values of the properties as there was a substantial economic difference between the properties sold and those retained. Also included in the gain calculation, were asset retirement obligations of $2,013,000 assumed by the purchaser.

The disposition was recorded in fiscal 2015 using preliminary purchase price adjustments. Barnwell and the purchaser updated and finalized the purchase price adjustments in accordance with the terms of the purchase and sale agreement during fiscal 2016 which resulted in additional proceeds of $493,000 and the recognition of an additional gain in the amount of $472,000 during the year ended September 30, 2016, bringing the total gain on the sale of these properties to $6,689,000.

The unaudited pro forma results of operations are presented below as though the disposition of Dunvegan occurred on October 1, 2014. The unaudited pro forma results do not purport to represent what our actual results of operations would have been if the disposition had been completed on such date or to project our results of operations for any future date or period. The pro forma information includes adjustments to oil and natural gas segment revenues and operating expenses based on the actual results of operations related to Dunvegan, as well as adjustments for estimated depletion, accretion expense, general and administrative expenses, and income taxes based on an allocation of the estimated impact of Dunvegan on those amounts.



	Year ended September 30, 2015
Pro forma (unaudited)	Historical		Pro forma
Total revenues	$	17,533,000	$	13,235,000
Net earnings (loss)	$	1,769,000	$	(761,000	)
Net earnings (loss) attributable to Barnwell Industries, Inc. stockholders	$	1,263,000	$	(1,267,000	)
Net earnings (loss) per common share attributable to Barnwell Industries, Inc. stockholders.	$	0.15	$	(0.15	)