SHARE-BASED PAYMENTS

9 Months Ended

Jun. 30, 2011

SHARE-BASED PAYMENTS

SHARE-BASED PAYMENTS

3. SHARE-BASED PAYMENTS

The Company’s share-based compensation (benefit) expense and related income tax effects for the three and nine months ended June 30, 2011 and 2010 are as follows:

	Three months ended								Nine months ended
	June 30,								June 30,
	2011				2010				2011			2010
Share-based compensation (benefit) expense		$	(945,000	)		$	(306,000	)		$	972,000		$	(89,000	)
Income tax effect		$	-			$	-			$	-		$	-

Share-based compensation (benefit) expense recognized in earnings for the three and nine months ended June 30, 2011 and 2010 are reflected in “General and administrative” expenses in the Condensed Consolidated Statements of Operations.  There was no impact on income taxes for the three and nine months ended June 30, 2011 and 2010 due to a full valuation allowance on the related deferred tax asset.

Equity-classified Awards

A summary of the activity in Barnwell’s equity-classified share options as of the beginning and end of the three and nine months ended June 30, 2011 is presented below:

	Three months ended June 30, 2011
						Weighted-
						Average
			Weighted-			Remaining
			Average			Contractual		Aggregate
			Exercise			Term		Intrinsic
Options	Shares		Price			(in years)		Value
Outstanding at April 1, 2011		60,000		$	8.62
Granted		-
Exercised		-
Expired		-
Forfeited		-
Outstanding at June 30, 2011		60,000		$	8.62		3.4		$	-
Exercisable at June 30, 2011		60,000		$	8.62		3.4		$	-

	Nine months ended June 30, 2011
						Weighted-
						Average
			Weighted-			Remaining
			Average			Contractual		Aggregate
			Exercise			Term		Intrinsic
Options	Shares		Price			(in years)		Value
Outstanding at October 1, 2010		60,000		$	8.62
Granted		-
Exercised		-
Expired		-
Forfeited		-
Outstanding at June 30, 2011		60,000		$	8.62		3.4		$	-
Exercisable at June 30, 2011		60,000		$	8.62		3.4		$	-

There was no share-based compensation expense for equity-classified awards in the three and nine months ended June 30, 2011 and 2010.

The total intrinsic value of equity options exercised during the nine months ended June 30, 2010 was $115,000.  No equity options were exercised during the three months ended June 30, 2010 or during the three and nine months ended June 30, 2011.

Liability-classified Awards

As of June 30, 2011, there was $362,000 of total unrecognized compensation cost related to nonvested liability-classified share options.  That cost is expected to be recognized over 2.3 years.

The following assumptions were used in estimating fair value for all liability-classified share options outstanding during the three and nine months ended June 30, 2011 and 2010:

	Three and nine months ended June 30,
	2011	2010
Expected volatility range	36.4% to 70.9%	47.4% to 69.3%
Weighted-average volatility	62.2%	51.8%
Expected dividends	0.0%	0.0%
Expected term (in years)	0.3 to 8.5	0.2 to 9.5
Risk-free interest rate	0.0% to 2.8%	0.2% to 3.0%
Expected forfeitures	None	None

The application of alternative assumptions could produce significantly different estimates of the fair value of share-based compensation, and consequently, the related costs reported in the Condensed Consolidated Statements of Operations.

A summary of the activity in Barnwell’s liability-classified share options as of the beginning and end of the three and nine months ended June 30, 2011 is presented below:

	Three months ended June 30, 2011
							Weighted-
							Average
				Weighted-			Remaining
				Average			Contractual		Aggregate
				Exercise			Term		Intrinsic
Options	Shares			Price			(in years)		Value
Outstanding at April 1, 2011		759,125			$	8.38
Granted		-
Exercised		(3,750	)		$	4.32
Expired		-
Forfeited		-
Outstanding at June 30, 2011		755,375			$	8.40		6.7		$	236,000
Exercisable at June 30, 2011		431,000			$	10.09		5.7		$	32,000

	Nine months ended June 30, 2011
							Weighted-
							Average
				Weighted-			Remaining
				Average			Contractual		Aggregate
				Exercise			Term		Intrinsic
Options	Shares			Price			(in years)		Value
Outstanding at October 1, 2010		798,500			$	8.18
Granted		-
Exercised		(43,125	)		$	4.32
Expired		-
Forfeited		-
Outstanding at June 30, 2011		755,375			$	8.40		6.7		$	236,000
Exercisable at June 30, 2011		431,000			$	10.09		5.7		$	32,000

Total share-based compensation for liability-classified awards for the three and nine months ended June 30, 2011 was a $945,000 benefit and a $972,000 expense, respectively, as compared to benefits of $306,000 and $89,000 during the three and nine months ended June 30, 2010, respectively.  Included in share-based compensation for liability-classified awards for the three and nine months ended June 30, 2011 were $76,000 and $293,000, respectively, of compensation expense related to shares that vested during each respective period and a $1,021,000 benefit and a $679,000 expense primarily due to the impact of fluctuations in Barnwell’s stock price on previously vested shares in each respective period.  Included in share-based compensation for liability-classified awards for the three and nine months ended June 30, 2010 were $72,000 and $170,000, respectively, of compensation expense related to shares that vested during each respective period and $378,000 and $259,000, respectively, of compensation benefits primarily due to the impact of fluctuations in Barnwell’s stock price on previously vested shares in each respective period.

In the three and nine months ended June 30, 2011, the cash feature of 3,750 and 43,125 shares, respectively, of non-qualified options were exercised.  The total intrinsic value of the liability-classified options exercised during the three and nine months ended June 30, 2011 was $12,000 and $130,000, respectively.  No liability-classified options were exercised during the three and nine months ended June 30, 2010.  There is no estimated tax benefit related to the options exercised during the three and nine months ended June 30, 2011 due to a full valuation allowance on the related deferred tax asset.