OIL AND NATURAL GAS PROPERTIES

3 Months Ended

Dec. 31, 2020

Oil and Natural Gas Properties [Abstract]

OIL AND NATURAL GAS PROPERTIES

OIL AND NATURAL GAS PROPERTIES

Dispositions

There were no oil and natural gas property dispositions during the three months ended December 31, 2020.

In the quarter ended December 31, 2019, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in properties located in the Progress area of Alberta, Canada. The sales price per the agreement was adjusted for customary purchase price adjustments to

$594,000 in order to, among other things, reflect an economic effective date of October 1, 2019. The proceeds were credited to the full cost pool, with no gain or loss recognized, as the sale did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

Acquisitions

There were no significant amounts paid for oil and natural gas property acquisitions during the three months ended December 31, 2020, and 2019.

Impairment of Oil and Natural Gas Properties

    Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations. There was a $630,000 ceiling test impairment during the three months ended December 31, 2020. There was no ceiling test impairment during the three months ended December 31, 2019.

    Changes in the mandated 12-month historical rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices, the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the estimated market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties. The ceiling test calculation as of December 31, 2019 included management’s estimation that the Company had the ability to fund all of the future capital expenditures necessary over the next five years to develop proved undeveloped reserves in the Twining area of Alberta, Canada. However, due to the impact on oil prices and the extreme uncertainties created by the COVID-19 pandemic on the Company's financial outlook, management is no longer reasonably certain that the Company will have the financial resources necessary to make any of the capital expenditures necessary to develop the proved undeveloped reserves. Therefore, the proved undeveloped reserves have been excluded from the quarterly ceiling test calculations subsequent to December 31, 2019.

    As discussed above, the ceiling test mandates the use of the 12-month historical rolling average first-day-of-the-month prices. If the 12-month historical rolling average first-day-of-the-month prices decline from the 12-month historical rolling average first-day-of-the-month prices used in the December 31, 2020 ceiling calculation, the Company could incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.