PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

12 Months Ended

Sep. 30, 2024

PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION

Barnwell’s property and equipment is detailed as follows:


	Estimated Useful Lives	Gross Property and Equipment		Accumulated Depletion, Depreciation, Amortization, and Impairment		Net Property and Equipment
At September 30, 2024:

Proved oil and natural gas properties (full cost method)		$	83,557,000	$	(67,003,000)	$	16,554,000


Drilling rigs and equipment	3 – 10 years	3,103,000		(2,823,000)		280,000

Other property and equipment	3 – 10 years	576,000		(562,000)		14,000
Total		$	87,236,000	$	(70,388,000)	$	16,848,000


	Estimated Useful Lives	Gross Property and Equipment		Accumulated Depletion, Depreciation, Amortization, and Impairment		Net Property and Equipment
At September 30, 2023:

Proved oil and natural gas properties (full cost method)		$	80,851,000	$	(59,549,000)	$	21,302,000


Drilling rigs and equipment	3 – 10 years	6,618,000		(6,127,000)		491,000

Other property and equipment	3 – 10 years	605,000		(587,000)		18,000
Total		$	88,074,000	$	(66,263,000)	$	21,811,000

See Note 7 for discussion of acquisitions and divestitures of oil and natural gas properties in fiscal 2024 and 2023.

Asset Retirement Obligation

Barnwell recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The following is a reconciliation of the asset retirement obligation:


	Year ended September 30,
	2024		2023
Asset retirement obligation as of beginning of year	$	9,833,000	$	8,456,000
Obligations incurred on new wells drilled or acquired	37,000		21,000
Liabilities associated with properties sold	(442,000)		—
Revision of estimated obligation	(614,000)		1,462,000
Accretion expense	900,000		808,000
Payments	(1,139,000)		(1,005,000)
Foreign currency translation adjustment	13,000		91,000
Asset retirement obligation as of end of year	8,588,000		9,833,000
Less current portion	(798,000)		(1,536,000)
Asset retirement obligation, long-term	$	7,790,000	$	8,297,000

Asset retirement obligations were reduced by $442,000 and nil in fiscal 2024 and 2023, respectively, for those obligations that were assumed by purchasers of Barnwell's oil and natural gas properties (see Note 7 for additional details on dispositions). Asset retirement obligations were also reduced by $614,000 in fiscal 2024 as compared to an increase of $1,462,000 in fiscal 2023 primarily due to downward revisions related to deferrals in the estimated timing of future abandonments as a result of changes in the estimated economic lives of certain wells due to improved production performance of many wells in the Twining area as a result of focused attention and investment in optimization to improve well performance and reduce operating costs. Asset retirement obligations also increased by $37,000 and $21,000 in fiscal 2024 and 2023, respectively, due primarily to our wells drilled and acquisitions. The asset retirement obligation reflects the estimated present value of the amount of dismantlement, removal, site reclamation, and similar activities associated with Barnwell's oil and natural gas properties. Barnwell estimates the ultimate productive life of the properties, a credit-adjusted risk-free rate, and an inflation factor in order to determine the current present value of this obligation. The credit-adjusted risk-free rate for the entire asset retirement obligation is a blended rate which ranges from 6% to 13.5%.

In September 2019, the AER issued an abandonment/closure order for all wells and facilities in the Manyberries area which had been largely operated by LGX, an operating company that went into receivership in 2016. The estimated asset retirement obligation for the Company's interest in the wells and facilities in the Manyberries area is included in “Asset retirement obligation” in the Consolidated Balance Sheets.

After the abandonment/closure order was issued for Manyberries, the OWA created a WIP program for specific areas where there are a significant number of orphaned wells to abandon. The OWA has the ability and expertise to abandon wells using its internal resources and network of service providers resulting in efficiencies that companies such as Barnwell would not be able to obtain on its own. Under the WIP program, the Company would be required to provide payment for only Barnwell’s working interest share, however, all WIP’s would have to participate in the program for the OWA to begin its work. In March 2021, the Company was notified by the OWA that Barnwell’s Manyberries wells were confirmed to be in the WIP program.

Under the agreement with the OWA, the Company is required to pay the abandonment and reclamation costs in advance through a cash deposit. The total cash deposit amount was calculated to be approximately $1,525,000 and the Company paid $888,000 of the total deposit in July and August 2021 and may need to pay the remaining balance of $637,000 by August 2025. The Company revised its Manyberries ARO liability based on the OWA’s revised abandonment and reclamation estimates. Based on a review of the details of the cash deposit calculation provided by the OWA, which includes amounts added for possible contingencies, the Company believes the required cash deposit amount by the OWA is higher than the actual costs of the asset retirement obligation for the Manyberries wells and that any excess of the deposit over actual asset retirement costs for the first phase of the work would be credited toward the second phase of the work. A remaining excess deposit, if any, would ultimately be refunded to the Company upon completion of all of the work. As of September 30, 2024, the Company recognized a cumulative reduction in the deposit balance of $353,000 for work performed under this program.