OIL AND NATURAL GAS PROPERTIES

9 Months Ended

Jun. 30, 2024

Oil and Natural Gas Properties [Abstract]

OIL AND NATURAL GAS PROPERTIES

OIL AND NATURAL GAS PROPERTIES

Oil and Natural Gas Property Dispositions

In the quarter ended June 30, 2024, Barnwell entered into and completed a purchase and sale agreement with an independent third party and sold its interests in certain natural gas and oil properties located in the Kaybob area of Alberta, Canada. The sales price per the agreement was adjusted for customary purchase price adjustments to $448,000 in order to, among other things, reflect an economic effective date of May 1, 2024. The final determination of the customary adjustments to the purchase price has not yet been made, however, it is not expected to result in a material adjustment.

Investments and Acquisitions

In December 2022, Barnwell Texas, LLC (“Barnwell Texas”), a wholly-owned subsidiary of the Company, entered into a purchase and sale agreement with an independent third party whereby Barnwell Texas acquired a 22.3% non-operated working interest in oil and natural gas leasehold acreage in the Permian Basin in Texas for cash consideration of $806,000. Additionally, in connection with the purchase of such leasehold interests, Barnwell Texas acquired a 15.4% non-operated working interest in two oil wells in the Wolfcamp Formation in Loving and Ward Counties, Texas and paid $4,293,000 for its share of the costs to drill, complete, and equip the wells in the nine months ended June 30, 2023.

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. During the three months ended June 30, 2024, the Company incurred a non-cash ceiling test impairment of $599,000, which included impairments for our U.S. and Canadian oil and natural gas properties of $112,000 and $487,000, respectively. The impairment to our U.S. oil and natural gas properties was due to a decline in the historical 12-month rolling average first-day-of-the-month prices, primarily attributed to decreases in natural gas prices for our Texas property which is sold at the Waha hub. The impairment to our Canadian oil and natural gas properties was primarily due to capital expenditures for which there is insufficient operating history to assign a determinable increase in future cash flows from reserves at period-end. There was no ceiling test impairment during the three months ended June 30, 2023.

During the nine months ended June 30, 2024, the Company incurred a non-cash ceiling test impairment of $2,276,000, which included impairments for our U.S. and Canadian oil and natural gas properties of $112,000 and $2,164,000, respectively. The impairment to our Canadian oil and natural gas properties during the nine months ended June 30, 2024 was primarily due to a decline in the historical 12-month rolling average first-day-of-the-month prices and due to capital expenditures for which there is insufficient operating history to assign a determinable increase in future cash flows from reserves at period-end. There was no ceiling test impairment during the nine months ended June 30, 2023.

Changes in the 12-month 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 market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties. If oil and natural gas prices decline sufficiently from the 12-month historical rolling average first-day-of-the-month prices used in the ceiling test at June 30, 2024, it is more likely than not that the Company will incur further impairment write-downs in future periods in the absence of any offsetting factors that are not currently known or projected.