10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X]              Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2015

or

[   ]              Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-5103 

BARNWELL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter) 

DELAWARE	72-0496921
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1100 Alakea Street, Suite 2900, Honolulu, Hawaii	96813
(Address of principal executive offices)	(Zip code)

(808) 531-8400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                         x Yes   o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).                     x Yes   o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                           o Yes   x No

As of May 11, 2015 there were 8,277,160 shares of common stock, par value $0.50, outstanding.

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

INDEX

PART I.	FINANCIAL INFORMATION:
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets - March 31, 2015 and September 30, 2014	3
	Condensed Consolidated Statements of Operations - three and six months ended March 31, 2015 and 2014	4
	Condensed Consolidated Statements of Comprehensive Loss - three and six months ended March 31, 2015 and 2014	5
	Condensed Consolidated Statements of Cash Flows - six months ended March 31, 2015 and 2014	6
	Condensed Consolidated Statements of Equity - three months ended March 31, 2015 and 2014	7
	Condensed Consolidated Statements of Equity - six months ended March 31, 2015 and 2014	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 4.	Controls and Procedures	39
PART II.	OTHER INFORMATION:
Item 1A.	Risk Factors	40
Item 3.	Defaults Upon Senior Securities	41
Item 6.	Exhibits	41
	Signature	42
	Index to Exhibits	43

PART I - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	March 31, 2015			September 30, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	9,097,000		$	16,104,000
Accounts and other receivables, net of allowance for doubtful accounts of: $28,000 at March 31, 2015; $34,000 at September 30, 2014	4,026,000			2,910,000
Note receivable	899,000			—
Prepaid expenses	486,000			221,000
Investment held for sale	—			1,139,000
Real estate held for sale	5,448,000			5,448,000
Other current assets	824,000			698,000
Total current assets	20,780,000			26,520,000
Investments	6,356,000			5,900,000
Property and equipment	200,660,000			223,023,000
Accumulated depletion, depreciation, and amortization	(179,877,000		)	(200,673,000		)
Property and equipment, net	20,783,000			22,350,000
Total assets	$	47,919,000		$	54,770,000
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	3,532,000		$	3,453,000
Accrued operating and other expenses	2,371,000			2,464,000
Accrued incentive and other compensation	572,000			1,085,000
Current portion of long-term debt	3,654,000			4,449,000
Other current liabilities	2,444,000			3,072,000
Total current liabilities	12,573,000			14,523,000
Long-term debt	5,000,000			6,650,000
Liability for retirement benefits	4,164,000			4,266,000
Asset retirement obligation	8,012,000			8,185,000
Deferred income taxes	1,740,000			1,201,000
Total liabilities	31,489,000			34,825,000
Commitments and contingencies (Note 14)
Equity:
Common stock, par value $0.50 per share; authorized, 20,000,000 shares: 8,445,060 issued at March 31, 2015 and September 30, 2014	4,223,000			4,223,000
Additional paid-in capital	1,326,000			1,315,000
Retained earnings	13,720,000			16,204,000
Accumulated other comprehensive loss, net	(1,384,000		)	(258,000		)
Treasury stock, at cost: 167,900 shares at March 31, 2015 and September 30, 2014	(2,286,000		)	(2,286,000		)
Total stockholders' equity	15,599,000			19,198,000
Non-controlling interests	831,000			747,000
Total equity	16,430,000			19,945,000
Total liabilities and equity	$	47,919,000		$	54,770,000

See Notes to Condensed Consolidated Financial Statements

3

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Revenues:
Oil and natural gas	$	2,092,000		$	6,397,000		$	5,064,000		$	11,724,000
Contract drilling	491,000			1,318,000			2,424,000			2,927,000
Sale of interest in leasehold land, net	817,000			—			1,849,000			120,000
Gas processing and other	92,000			118,000			187,000			263,000
	3,492,000			7,833,000			9,524,000			15,034,000
Costs and expenses:
Oil and natural gas operating	1,818,000			2,042,000			3,441,000			4,663,000
Contract drilling operating	472,000			1,089,000			1,997,000			2,401,000
General and administrative	2,104,000			2,301,000			4,379,000			4,157,000
Depletion, depreciation, and amortization	868,000			1,904,000			1,847,000			4,068,000
Interest expense	82,000			192,000			172,000			355,000
	5,344,000			7,528,000			11,836,000			15,644,000
(Loss) income before equity in income (loss) of affiliates and income taxes	(1,852,000		)	305,000			(2,312,000		)	(610,000		)
Equity in income (loss) of affiliates	368,000			(116,000		)	456,000			(263,000		)
(Loss) income before income taxes	(1,484,000		)	189,000			(1,856,000		)	(873,000		)
Income tax provision	389,000			513,000			300,000			451,000
Net loss	(1,873,000		)	(324,000		)	(2,156,000		)	(1,324,000		)
Less: Net income (loss) attributable to non-controlling interests	144,000			(39,000		)	328,000			(50,000		)
Net loss attributable to Barnwell Industries, Inc.	$	(2,017,000	)	$	(285,000	)	$	(2,484,000	)	$	(1,274,000	)
Basic and diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders	$	(0.24	)	$	(0.03	)	$	(0.30	)	$	(0.15	)
Weighted-average number of common shares outstanding:
Basic and diluted	8,277,160			8,277,160			8,277,160			8,277,160

See Notes to Condensed Consolidated Financial Statements

4

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Net loss	$	(1,873,000	)	$	(324,000	)	$	(2,156,000	)	$	(1,324,000	)
Other comprehensive loss:
Foreign currency translation adjustments, net of taxes of $0	(772,000		)	(921,000		)	(1,179,000		)	(1,701,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	27,000			8,000			53,000			16,000
Total other comprehensive loss	(745,000		)	(913,000		)	(1,126,000		)	(1,685,000		)
Total comprehensive loss	(2,618,000		)	(1,237,000		)	(3,282,000		)	(3,009,000		)
Less: Comprehensive income (loss) attributable to non-controlling interests	144,000			(39,000		)	328,000			(50,000		)
Comprehensive loss attributable to Barnwell Industries, Inc.	$	(2,762,000	)	$	(1,198,000	)	$	(3,610,000	)	$	(2,959,000	)

See Notes to Condensed Consolidated Financial Statements

5

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six months ended   March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(2,156,000	)	$	(1,324,000	)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Equity in (income) loss of affiliates	(456,000		)	263,000
Depletion, depreciation, and amortization	1,847,000			4,068,000
Foreign exchange loss (gain)	146,000			(48,000		)
Loss on sale of investment	16,000			—
Retirement benefits expense	204,000			182,000
Accretion of asset retirement obligation	308,000			238,000
Deferred income tax expense (benefit)	647,000			(92,000		)
Asset retirement obligation payments	(489,000		)	(70,000		)
Share-based compensation benefit	(47,000		)	(190,000		)
Retirement plan contributions	(253,000		)	(3,000		)
Sale of interest in leasehold land, net	(1,849,000		)	(120,000		)
(Decrease) increase from changes in current assets and liabilities	(2,361,000		)	106,000
Net cash (used in) provided by operating activities	(4,443,000		)	3,010,000
Cash flows from investing activities:
Proceeds from sale of interest in leasehold land, net of fees paid	1,849,000			120,000
Proceeds from sale of investment, net of closing costs	266,000			—
Proceeds from sale of oil and natural gas assets	—			2,828,000
Proceeds from gas over bitumen royalty adjustments	—			8,000
Payment to acquire oil and natural gas properties	(526,000		)	—
Payment to acquire interest in affiliates	—			(5,140,000		)
Capital expenditures - oil and natural gas	(564,000		)	(2,700,000		)
Capital expenditures - all other	(75,000		)	(38,000		)
Net cash provided by (used in) investing activities	950,000			(4,922,000		)
Cash flows from financing activities:
Proceeds from long-term debt borrowings	—			5,000,000
Repayments of long-term debt	(2,445,000		)	(1,770,000		)
Increase in restricted cash	—			(1,947,000		)
Contributions from non-controlling interests	90,000			80,000
Distributions to non-controlling interests	(334,000		)	—
Net cash (used in) provided by financing activities	(2,689,000		)	1,363,000
Effect of exchange rate changes on cash and cash equivalents	(825,000		)	(116,000		)
Net decrease in cash and cash equivalents	(7,007,000		)	(665,000		)
Cash and cash equivalents at beginning of period	16,104,000			7,828,000
Cash and cash equivalents at end of period	$	9,097,000		$	7,163,000

See Notes to Condensed Consolidated Financial Statements

6

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Three months ended March 31, 2015 and 2014

(Unaudited)

	Shares Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Non-controlling Interests			Total Equity
Balance at December 31, 2013	8,277,160	$	4,223,000	$	1,291,000	$	14,543,000		$	2,219,000		$	(2,286,000	)	$	624,000		$	20,614,000
Contributions from non-controlling interests															16,000			16,000
Net loss						(285,000		)							(39,000		)	(324,000		)
Share-based compensation				8,000														8,000
Foreign currency translation adjustments, net of taxes of $0									(921,000		)							(921,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0									8,000									8,000
Balance at March 31, 2014	8,277,160	$	4,223,000	$	1,299,000	$	14,258,000		$	1,306,000		$	(2,286,000	)	$	601,000		$	19,401,000
Balance at December 31, 2014	8,277,160	$	4,223,000	$	1,322,000	$	15,737,000		$	(639,000	)	$	(2,286,000	)	$	765,000		$	19,122,000
Contributions from non-controlling interests															45,000			45,000
Distributions to non-controlling interests															(123,000		)	(123,000		)
Net (loss) income						(2,017,000		)							144,000			(1,873,000		)
Share-based compensation				4,000														4,000
Foreign currency translation adjustments, net of taxes of $0									(772,000		)							(772,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0									27,000									27,000
Balance at March 31, 2015	8,277,160	$	4,223,000	$	1,326,000	$	13,720,000		$	(1,384,000	)	$	(2,286,000	)	$	831,000		$	16,430,000

See Notes to Condensed Consolidated Financial Statements

7

BARNWELL INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

Six months endedMarch 31, 2015 and 2014

(Unaudited)

	Shares Outstanding	Common Stock		Additional Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Non-controlling Interests			Total Equity
Balance at September 30, 2013	8,277,160	$	4,223,000	$	1,289,000	$	15,532,000		$	2,991,000		$	(2,286,000	)	$	571,000		$	22,320,000
Contributions from non-controlling interests															80,000			80,000
Net loss						(1,274,000		)							(50,000		)	(1,324,000		)
Share-based compensation				10,000														10,000
Foreign currency translation adjustments, net of taxes of $0									(1,701,000		)							(1,701,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0									16,000									16,000
Balance at March 31, 2014	8,277,160	$	4,223,000	$	1,299,000	$	14,258,000		$	1,306,000		$	(2,286,000	)	$	601,000		$	19,401,000
Balance at September 30, 2014	8,277,160	$	4,223,000	$	1,315,000	$	16,204,000		$	(258,000	)	$	(2,286,000	)	$	747,000		$	19,945,000
Contributions from non-controlling interests															90,000			90,000
Distributions to non-controlling interests															(334,000		)	(334,000		)
Net (loss) income						(2,484,000		)							328,000			(2,156,000		)
Share-based compensation				11,000														11,000
Foreign currency translation adjustments, net of taxes of $0									(1,179,000		)							(1,179,000		)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0									53,000									53,000
Balance at March 31, 2015	8,277,160	$	4,223,000	$	1,326,000	$	13,720,000		$	(1,384,000	)	$	(2,286,000	)	$	831,000		$	16,430,000

See Notes to Condensed Consolidated Financial Statements

8

BARNWELL INDUSTRIES, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6%-owned land investment general partnership (Kaupulehu Developments), a 75%-owned land investment partnership (KD Kona 2013 LLLP) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method.

Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2014 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2014 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2015, results of operations, comprehensive loss, and equity for the three and six months ended March 31, 2015 and 2014, and cash flows for the six months ended March 31, 2015 and 2014, have been made. The results of operations for the period ended March 31, 2015 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

9

Significant Accounting Policies

Other than as set forth below, there have been no changes to Barnwell’s significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s most recently filed Annual Report on Form 10-K.

Acquisitions

Acquisitions of businesses are accounted for using the acquisition method of accounting. Purchase prices are allocated to acquired assets and assumed liabilities based on their estimated fair value at the time of the acquisition. A business combination may result in the recognition of a gain or goodwill based on the fair value of the assets acquired and liabilities assumed at the acquisition date as compared to the fair value of consideration transferred.

Note Receivable

The note receivable consists of a purchase money mortgage related to the sale of one residential parcel. Barnwell estimates an allowance for this financing receivable based on an evaluation of the credit worthiness of the counterparty and has determined that no allowance is needed at March 31, 2015. This financing receivable is considered in default if not paid in full on the maturity date at which time the amount in default will accrue interest. Amounts deemed uncollectible will be written off against an established allowance.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date.” This update provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In March 2013, the FASB issued ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This update provides guidance on releasing cumulative translation adjustments when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In April 2013, the FASB issued ASU No. 2013-07, “Liquidation Basis of Accounting,” which provides guidance on when and how to apply the liquidation basis of accounting and on what to disclose. The update requires an entity to prepare its financial statements using the liquidation basis of accounting

10

when liquidation is imminent, as defined in the update. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In November 2014, the FASB issued ASU 2014-17, “Pushdown Accounting,” which provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.  The election to apply pushdown accounting can be made either in the period in which the change of control occurred or in a subsequent period.  If the election is made in a subsequent period, it would be considered a change in accounting principle and treated in accordance with Topic 250, “Accounting Changes and Error Corrections.” The Company adopted the provisions of this ASU on November 18, 2014, as the amendments in the update were effective upon issuance. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements. 

2.    LIQUIDITY

As of March 31, 2015, Barnwell had $9,097,000 in cash and cash equivalents and working capital totaled $8,207,000. Upon the April 2015 renewal of our secured Canadian credit facility, the borrowing capacity thereunder was reduced from $11,800,000 Canadian dollars to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate. This reduction in the borrowing capacity was largely due to significant declines in the bank’s forecast of oil and natural gas prices and leaves Barnwell with minimal available credit under the facility.

If recent low oil and natural gas prices are sustained, our oil and natural gas segment will continue to experience significant reductions in operating results, cash reserves and liquidity. This, along with minimal available credit under the Canadian credit facility, will adversely affect our ability to replace the Company's declining oil and natural gas reserves. In addition, in January 2015, there was an oil and salt water spill at one of our operated oil properties in Alberta. Total clean up expenses are expected to be approximately $2,300,000, of which we have a 58% working interest. We expect to recover a substantial portion of those expenses from insurance claims and from the other working interest owners for their share of the costs, after which we estimate our net cost to be approximately $160,000, which includes the amount of the insurance policy deductible, estimated legal fees and estimated monitoring and other costs. Based on discussions with our insurer, we currently believe it is probable that these clean up expenses will be covered by insurance. If the insurance reimbursement is less than our current estimate or our joint venture partners fail to reimburse us for their share of costs, there could be a material adverse effect on our operations, liquidity, cash flows and financial condition.

Because of the impact of recent declines in oil and natural gas prices on our oil and natural gas segment, Barnwell estimates that it will be heavily reliant upon land investment segment proceeds in order to provide sufficient liquidity to fund our operations in the near term. Although there has been a recent

11

increase in land investment segment proceeds, there can be no assurance that this trend will continue or that the amount of future land investment segment proceeds will provide the liquidity required. Management is working to improve the Company’s liquidity by, among other things, exploring the sale of certain of its oil and natural gas properties. Management anticipates that such sales will be required to sustain the Company’s operations in the future. However, there can be no assurance that the Company will be successful in securing the sale of any of its oil and natural gas properties.

If oil and natural gas, land investment and residential real estate segment proceeds are not sufficient, Barnwell’s Canadian revolving credit facility is further reduced below the level of borrowings under the facility upon the April 2016 review, and/or we fall short of our key financial debt covenants for our real estate loan and are required to repay all or a portion of our loan borrowings earlier than anticipated, there will be a material adverse effect on our operations, liquidity, cash flows and financial condition, and the Company will need to obtain alternative terms or sources of financing or liquidate investments and/or operating assets to make any required cash outflows. Our liquidity issues may force us to curtail existing operations, reduce or delay capital expenditures, or sell assets on less favorable terms. There can be no assurance the Company will be able to secure the sale of any of its oil and natural gas properties or realize enough proceeds from such sales to fund its operations, or to otherwise resolve its liquidity issues.

3.    LOSS PER COMMON SHARE

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options. Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

Options to purchase 621,250 and 837,250 shares of common stock were excluded from the computation of diluted shares for the three and six months ended March 31, 2015 and 2014, respectively, as their inclusion would have been antidilutive.

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

	Three months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)

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	Six months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)

	Three months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(285,000	)	8,277,160	$	(0.03	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(285,000	)	8,277,160	$	(0.03	)

	Six months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)

4.    NOTE RECEIVABLE

In October 2014, Barnwell sold one residential parcel for $1,250,000 and received a down payment of $343,000 and a purchase money mortgage from the buyer for the remainder of the sales price. The note is due 270 days from the closing date and the residential parcel is collateral for the note. The note is non-interest bearing and has accordingly been recorded at a discount using an interest rate based on market rates for similar instruments. See Note 6 for additional information regarding the sale of the residential parcel. 

5.    REAL ESTATE HELD FOR SALE

Kaupulehu 2007, LLLP (“Kaupulehu 2007”) currently owns one luxury residence that is available for sale in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

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6.    INVESTMENTS

A summary of Barnwell’s investments is as follows:

	March 31, 2015		September 30, 2014
Investment in residential parcel	$	1,192,000	$	1,192,000
Investment in land development partnerships	5,114,000		4,658,000
Investment in leasehold land interest – Lot 4C	50,000		50,000
Total investments	$	6,356,000	$	5,900,000

Investment in residential parcels

At March 31, 2015, Kaupulehu 2007 owned one residential parcel in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

A second residential parcel, which was included in investment held for sale at September 30, 2014, was sold in October 2014 for $1,250,000 for a nominal loss which is included in general and administrative expenses in the Condensed Consolidated Statements of Operations.

Investment in land development partnerships

On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP and KKM Makai, LLLP, and indirectly acquired a 19.6% non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP for $5,140,000. These entities own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KD Kaupulehu, LLLP, which is comprised of KD Acquisition, LLLP (“KD I”) and KD Acquisition II, LLLP (“KD II”), is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments. Barnwell’s investment in these entities is accounted for using the equity method of accounting.

The limited liability limited partnership agreements provide for a priority return of Barnwell’s investment prior to profit distributions. Net profits, losses and cash flows of the partnerships are allocated to Barnwell and the other partners at varying percentages based on whether the initial and any additional capital contributions plus any preferred returns due to contributing partners have been repaid to the investors.

Barnwell’s share of the income of its equity affiliates was $368,000 and $456,000 for the three and six months ended March 31, 2015, respectively, and the share of the loss of its equity affiliates was $116,000 and $263,000 for the three and six months ended March 31, 2014, respectively. The equity in the underlying net assets of the Kukio Resort land development partnerships exceeds the carrying value of the investment in affiliates by approximately $315,000 as of March 31, 2015, which is attributable to differences in the value of capitalized development costs and a note receivable. The basis difference for the capitalized development costs will be recognized as the partnerships sell lots and recognize the associated costs. The basis difference for the note receivable will be recognized as the partnerships sell memberships for the Kukio Golf and Beach Club for which the receivable relates. The basis difference adjustment for the three and six months ended

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March 31, 2015 was inconsequential and there was no basis difference adjustment for the three and six months ended March 31, 2014.

Barnwell, as well as KD I, KD II and certain other owners of the partnerships, have jointly and severally executed a surety indemnification agreement. Bonds issued by the surety at March 31, 2015 totaled approximately $4,830,000 and relate to certain construction contracts of KD I and KD II. If any such performance bonds are called, we may be obligated to reimburse the issuer of the performance bond as Barnwell, KD I, KD II and certain other partners are jointly and severally liable, however we believe that it is remote that a material amount of any currently outstanding performance bonds will be called. Performance bonds do not have stated expiration dates. Rather, the performance bonds are released as the underlying performance is completed.

As of March 31, 2015, Barnwell’s maximum loss exposure as a result of its investment in the Kukio Resort land development partnerships was approximately $9,944,000, consisting of the carrying value of the investment of $5,114,000 and $4,830,000 from the surety indemnification agreement of which we are jointly and severally liable.

Summarized financial information for the Kukio Resort land development partnerships is as follows:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Revenue	$	6,081,000	$	1,353,000
Gross profit	$	2,982,000	$	545,000
Net earnings (loss)	$	2,143,000	$	(428,000	)

	Six months ended March 31, 2015		November 27, 2013 - March 31, 2014
Revenue	$	10,707,000	$	1,622,000
Gross profit	$	4,409,000	$	653,000
Net earnings (loss)	$	2,563,000	$	(809,000	)

Percentage of sales payments

Kaupulehu Developments has the right to receive payments from KD I and KD II resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area by KD I and KD II in two increments (“Increment I” and “Increment II”) (see Note 16).

The following table summarizes the Increment I percentage of sales payment revenues received from KD I.

	Three months ended   March 31,					Six months ended   March 31,
	2015			2014		2015			2014
Sale of interest in leasehold land:
Proceeds	$	950,000		$	—	$	2,150,000		$	140,000
Fees	(133,000		)	—		(301,000		)	(20,000		)
Revenues – sale of interest in leasehold land, net	$	817,000		$	—	$	1,849,000		$	120,000

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Investment in leasehold land interest - Lot 4C

Kaupulehu Developments holds an interest in an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A. The lease terminates in December 2025. 

7.    ACQUISITION OF OIL AND NATURAL GAS PROPERTIES

On November 13, 2014, Barnwell completed the acquisition of additional non-operated working interests in oil and natural gas properties located in the Progress area of Alberta, Canada for cash consideration of $526,000, subject to further customary post-closing adjustments. The final determination of the customary adjustments to the purchase price will be made by the parties approximately 180 days after closing. The results of operations for the Progress acquisition have 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 Condensed Consolidated Statements of Operations.

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 purchase price allocation for the acquisition has been finalized except for the settlement of certain post-closing adjustments with the seller to reflect an economic effective date of July 1, 2014. 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. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 13 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

8.    LONG-TERM DEBT

A summary of Barnwell’s long-term debt is as follows:

	March 31, 2015			September 30, 2014
Canadian revolving credit facility	$	5,000,000		$	7,000,000
Real estate loan	3,654,000			4,099,000
	8,654,000			11,099,000
Less: current portion	(3,654,000		)	(4,449,000		)
Total long-term debt	$	5,000,000		$	6,650,000

Canadian revolving credit facility

On April 10, 2015, Barnwell’s credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provides for a decrease in the aggregate principal amount of the revolving credit facility to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate, from $11,800,000 Canadian dollars. This reduction in the borrowing capacity is largely due to significant

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declines in the bank’s forecast of oil and natural gas prices. The other material terms of the credit facility remain unchanged.

The obligations under the credit facility are secured by substantially all of the assets of Barnwell of Canada, Limited. The credit facility subjects Barnwell to certain customary affirmative covenants, including the delivery of financial statements and annual appraisals of certain oil and gas properties. In addition, the credit facility contains customary negative covenants, including, but not limited to, restrictions on the ability of Barnwell to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, or sell certain oil and gas properties or petroleum and natural gas reserves (other than the sale of production from such oil and gas properties in the ordinary course of business). The credit facility also contains provisions concerning customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, amounts due under the credit facility may be accelerated, and the rights and remedies of Royal Bank of Canada under the credit facility may be exercised, including rights with respect to the collateral securing Barnwell’s obligations thereunder.

In February 2015, Barnwell repaid $2,000,000 of the credit facility. During the three and six months ended March 31, 2015, Barnwell realized a foreign currency transaction loss of $146,000 as a result of the repayment of U.S. dollar denominated debt using Canadian dollars. Borrowings under this facility were US$5,000,000 at March 31, 2015. The interest rate on the facility at March 31, 2015 was 2.67%.

The renewed facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.50%, at Royal Bank of Canada’s U.S. base rate plus 1.50%, or in Canadian dollars at Royal Bank of Canada’s prime rate plus 1.50%. A standby fee of 0.625% per annum is charged on the unused facility balance. Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2016. Subject to that review, the facility may be renewed for one year with no required debt repayments or converted to a two-year term loan by the bank. If the facility is converted to a two-year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance: first year of the term period - 20% (5% per quarter), and in the second year of the term period - 80% (5% per quarter for the first three quarters and 65% in the final quarter). Based on the terms of this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2016, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2016. As no debt repayments will be required on or before March 31, 2016, the entire outstanding loan balance at March 31, 2015 is classified as long-term debt.

Real estate loan

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank. In January 2015, the loan was amended from monthly principal and interest payments to monthly interest-only payments effective February 1, 2015. All other terms of the loan remained unchanged. The principal balance and any accrued interest will be due and payable on April 1, 2018. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at March 31, 2015 was 3.41% and was adjusted to 3.59% effective April 1, 2015.

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or the residential parcel in the amount of the net sales proceeds of the house or residential parcel;

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the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

As a result of the sale of one of the residential parcels in October 2014, Kaupulehu 2007 repaid $266,000 of the real estate loan, as required from the net proceeds of the sale, in addition to the scheduled monthly payments. Barnwell is required to remit the remaining net sales proceeds upon collection of the note receivable related to the sale of the residential parcel in July 2015.

The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio and a consolidated total liabilities to tangible net worth ratio. At March 31, 2015, the Company was in violation as a result of exceeding the maximum consolidated total liabilities to tangible net worth ratio. The Company obtained a waiver from the bank for non-compliance with the covenant.

The home collateralizing the loan is currently available for sale; therefore, the entire balance outstanding at March 31, 2015 under the term loan has been classified as a current liability.

9.    RETIREMENT PLANS

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees. Additionally, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering eligible U.S. employees.

The following table details the components of net periodic benefit cost for Barnwell’s retirement plans:

	Pension Plan						SERP						Postretirement Medical
	Three months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	77,000		$	59,000		$	16,000		$	11,000		$	—		$	3,000
Interest cost	91,000			84,000			20,000			17,000			13,000			14,000
Expected return on plan assets	(125,000		)	(105,000		)	—			—			—			—
Amortization of prior service cost (credit)	2,000			2,000			(1,000		)	(2,000		)	—			3,000
Amortization of net actuarial loss (gain)	22,000			9,000			6,000			1,000			(2,000		)	(5,000		)
Net periodic benefit cost	$	67,000		$	49,000		$	41,000		$	27,000		$	11,000		$	15,000

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	Pension Plan						SERP						Postretirement Medical
	Six months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	128,000		$	118,000		$	31,000		$	23,000		$	—		$	6,000
Interest cost	178,000			169,000			38,000			33,000			26,000			27,000
Expected return on plan assets	(250,000		)	(210,000		)	—			—			—			—
Amortization of prior service cost (credit)	3,000			3,000			(2,000		)	(3,000		)	—			6,000
Amortization of net actuarial loss (gain)	43,000			18,000			12,000			2,000			(3,000		)	(10,000		)
Net periodic benefit cost	$	102,000		$	98,000		$	79,000		$	55,000		$	23,000		$	29,000

Barnwell contributed $250,000 to the Pension Plan during the six months ended March 31, 2015 and does not expect to make any further contributions during the remainder of fiscal 2015. The SERP and Postretirement Medical plans are unfunded, and Barnwell funds benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2015 and expected payments under the SERP for fiscal 2015 are not material. Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

10.    INCOME TAXES

The components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests, are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
United States	$	(179,000	)	$	(1,389,000	)	$	(415,000	)	$	(2,239,000	)
Canada	(1,449,000		)	1,617,000			(1,769,000		)	1,416,000
	$	(1,628,000	)	$	228,000		$	(2,184,000	)	$	(823,000	)

The components of the income tax provision (benefit) are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Current	$	(350,000	)	$	672,000		$	(347,000	)	$	543,000
Deferred	739,000			(159,000		)	647,000			(92,000		)
	$	389,000		$	513,000		$	300,000		$	451,000

As a result of significant declines in prices, funds available for oil and natural gas capital expenditures are projected to be minimal in the near term and thus Barnwell's ability to replace production and abate declining reserves has been significantly restricted as compared to the recent past. Accordingly, Barnwell has determined that it is not more likely than not that all of our oil and natural gas deferred tax assets under

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Canadian tax law are realizable. As such, during the quarter ended March 31, 2015, a valuation allowance of $785,000, which increased deferred income tax expense, was recorded for the portion of Canadian tax law deferred tax assets related to asset retirement obligations that may not be realizable.

Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that Canadian taxable income is not sheltered by U.S. source losses, Canadian income taxes are not estimated to have a current or future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses are not estimated to have any future U.S. tax benefit prior to expiration. In addition, consolidated taxes in the current year periods include the aforementioned valuation allowance for a portion of deferred tax assets under Canadian tax law.

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11.    SEGMENT INFORMATION

Barnwell operates the following segments: 1) exploring for, developing, acquiring, producing and selling oil and natural gas in Canada (oil and natural gas); 2) investing in land interests in Hawaii (land investment); 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling); and 4) developing homes for sale in Hawaii (residential real estate).

The following table presents certain financial information related to Barnwell’s reporting segments. All revenues reported are from external customers with no intersegment sales or transfers.

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Revenues:
Oil and natural gas	$	2,092,000		$	6,397,000		$	5,064,000		$	11,724,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	491,000			1,318,000			2,424,000			2,927,000
Other	76,000			112,000			154,000			253,000
Total before interest income	3,476,000			7,827,000			9,491,000			15,024,000
Interest income	16,000			6,000			33,000			10,000
Total revenues	$	3,492,000		$	7,833,000		$	9,524,000		$	15,034,000
Depletion, depreciation, and amortization:
Oil and natural gas	$	772,000		$	1,797,000		$	1,655,000		$	3,856,000
Contract drilling	70,000			78,000			141,000			156,000
Other	26,000			29,000			51,000			56,000
Total depletion, depreciation, and amortization	$	868,000		$	1,904,000		$	1,847,000		$	4,068,000
Operating profit (before general and administrative expenses):
Oil and natural gas	$	(498,000	)	$	2,558,000		$	(32,000	)	$	3,205,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	(51,000		)	151,000			286,000			370,000
Other	50,000			83,000			103,000			197,000
Total operating profit	318,000			2,792,000			2,206,000			3,892,000
Equity in income (loss) of affiliates:
Land investment	368,000			(116,000		)	456,000			(263,000		)
General and administrative expenses	(2,104,000		)	(2,301,000		)	(4,379,000		)	(4,157,000		)
Interest expense	(82,000		)	(192,000		)	(172,000		)	(355,000		)
Interest income	16,000			6,000			33,000			10,000
(Loss) income before income taxes	$	(1,484,000	)	$	189,000		$	(1,856,000	)	$	(873,000	)

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12.    ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The changes in each component of accumulated other comprehensive (loss) income were as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Foreign currency translation:
Beginning accumulated foreign currency translation	$	1,285,000		$	2,921,000		$	1,692,000		$	3,701,000
Change in cumulative translation adjustment before reclassifications	(918,000		)	(873,000		)	(1,325,000		)	(1,653,000		)
Amounts reclassified from accumulated other comprehensive income	146,000			(48,000		)	146,000			(48,000		)
Income taxes	—			—			—			—
Net current period other comprehensive loss	(772,000		)	(921,000		)	(1,179,000		)	(1,701,000		)
Ending accumulated foreign currency translation	513,000			2,000,000			513,000			2,000,000
Retirement plans:
Beginning accumulated retirement plans benefit cost	(1,924,000		)	(702,000		)	(1,950,000		)	(710,000		)
Amortization of net actuarial loss and prior service cost	27,000			8,000			53,000			16,000
Income taxes	—			—			—			—
Net current period other comprehensive income	27,000			8,000			53,000			16,000
Ending accumulated retirement plans benefit cost	(1,897,000		)	(694,000		)	(1,897,000		)	(694,000		)
Accumulated other comprehensive (loss) income, net of taxes	$	(1,384,000	)	$	1,306,000		$	(1,384,000	)	$	1,306,000

The realized foreign currency transaction loss (gain) related to the repayment of debt was reclassified from accumulated other comprehensive income to general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. The amortization of accumulated other comprehensive loss components for the retirement plans are included in the computation of net periodic benefit cost which is a component of general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations (see Note 9 for additional details).

13.    FAIR VALUE MEASUREMENTS

The carrying values of cash and cash equivalents, accounts and other receivables, accounts payable and accrued current liabilities approximate their fair values due to the short-term nature of the instruments. The carrying value of the note receivable approximates fair value as it has been recorded at a discount using an interest rate based on market rates for similar instruments. The carrying value of long-term debt approximates fair value as the terms approximate current market terms for similar debt instruments of comparable risk and maturities.

The estimated fair values of oil and natural gas properties and the asset retirement obligation assumed in the acquisition of additional non-operated working interests located in the Progress area of Alberta, Canada, are based on an estimated discounted cash flow model and market assumptions. The significant Level 3 assumptions used in the calculation of estimated discounted cash flows included future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development, operating and asset retirement costs, projections of future rates of production, expected

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recovery rates and risk adjusted discount rates. See Note 7 for additional information regarding the Progress acquisition.

14.    COMMITMENTS AND CONTINGENCIES

Environmental Matters

In January 2015, there was an oil and salt water spill at one of our operated oil properties in Alberta, Canada. We have estimated that probable environmental remediation costs will be approximately $2,300,000. Barnwell’s working interest in the well is 58%, and we expect to recover monies from the other working interest owners for their share of the costs and have accordingly recorded a receivable of $894,000 at March 31, 2015. Additionally, we have filed a claim under our insurance policy, which has a deductible of approximately $80,000, and based on discussions with our insurer we currently believe it is probable that these clean up expenses will be covered by insurance, and as such, a receivable of $1,156,000 was recorded at March 31, 2015, which represents the estimated recovery amount. The total estimated net financial impact for Barnwell, which includes the insurance deductible, estimated legal fees and estimated monitoring and other costs, is approximately $160,000, which has been recorded in the three and six months ended March 31, 2015.

Environmental remediation costs for the oil and salt water spill have not been discounted and were accrued in “Accounts payable” on the Condensed Consolidated Balance Sheets. At March 31, 2015, the gross liability was $1,349,000.

At March 31, 2015 and September 30, 2014, environmental remediation costs of $401,000 and $501,000, respectively, were accrued for the estimated liability for probable environmental remediation costs for soil contamination from infrastructure issues at the Dunvegan and Wood River properties in which we own a non-operating working interest. The estimated liability is based on authorization for expenditure requests and cost estimates received by Barnwell from the property operators in 2013. Environmental remediation costs for Dunvegan and Wood River have not been discounted and were accrued in “Accrued operating and other expenses” on the Condensed Consolidated Balance Sheets.

Because of the inherent uncertainties associated with environmental assessment and remediation activities, future expenses to remediate the currently identified sites, and sites identified in the future, if any, could be incurred.

Guarantee

See Note 6 for a discussion of Barnwell’s guarantee of the Kukio Resort land development partnership’s performance bonds.

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15.    INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended   March 31,
	2015		2014
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	164,000	$	324,000
Income taxes paid	$	—	$	123,000
Supplemental disclosure of non-cash investing and financing activities:
Note receivable for sale of investment	$	907,000	$	—

Capital expenditure accruals related to oil and natural gas exploration and development increased $295,000 and decreased $497,000 during the six months ended March 31, 2015 and 2014, respectively. Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $938,000 and $58,000 during the six months ended March 31, 2015 and 2014, respectively.

16.    RELATED PARTY TRANSACTIONS

Kaupulehu Developments is entitled to receive a percentage of the gross receipts from the sales of single-family residential lots in Increment I from KD I, a land development partnership in which Barnwell holds a 19.6% non-controlling ownership interest accounted for under the equity method of investment. The percentage payments are part of a 2004 transaction where Kaupulehu Developments sold its leasehold interest in Increment I, which was prior to Barnwell’s affiliation with KD I which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort land development partnerships.

During the six months ended March 31, 2015, Barnwell received $2,150,000 in percentage of sales payments from KD I from the sale of six contiguous lots within Phase I of Increment I to a single buyer and five lots within Phase II of Increment I. The lot sale during the six months ended March 31, 2014 occurred prior to our purchase of ownership interests in the Kukio Resort land development partnerships. 

17.    SUBSEQUENT EVENT

In April 2015, Kaupulehu Developments received percentage of sales payments of $643,000 from the sale of two lots within Phase II of Increment I. Financial results from the receipt of these payments will be reflected in Barnwell’s quarter ending June 30, 2015.

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ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Relevant to Forward-Looking Information

For the Purpose Of “Safe Harbor” Provisions Of The

Private Securities Litigation Reform Act of 1995

This Form 10-Q, and the documents incorporated herein by reference, contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historical or current facts. These statements include various estimates, forecasts, projections of Barnwell’s future performance, statements of Barnwell’s plans and objectives, and other similar statements. Forward-looking statements include phrases such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates,” “assumes,” “projects,” “may,” “will,” “will be,” “should,” or similar expressions. Although Barnwell believes that its current expectations are based on reasonable assumptions, it cannot assure that the expectations contained in such forward-looking statements will be achieved. Forward-looking statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from those contained in such statements. The risks, uncertainties and other factors that might cause actual results to differ materially from Barnwell’s expectations are set forth in the “Forward-Looking Statements” and “Risk Factors” sections of Barnwell’s Annual Report on Form 10-K for the year ended September 30, 2014 and the “Risk Factors” section in this Form-10Q. Investors should not place undue reliance on these forward-looking statements, as they speak only as of the date of filing of this Form 10-Q, and Barnwell expressly disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein.

General

In light of the circumstances discussed in Note 2 to the Condensed Consolidated Financial Statements, our primary focus is on cash management and potential asset sales to solve our liquidity issues. See our discussion under “Liquidity and Capital Resources” below.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies and estimates are those related to the evaluation of recoverability of assets, depletion of our oil and natural gas properties, income taxes and asset retirement obligation which are discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2014. There have been no significant changes to these critical accounting policies and estimates during the three and six months ended March 31, 2015. We continue to monitor our accounting policies to ensure proper application of current rules and regulations.

Impact of Recently Issued Accounting Standards on Future Filings

In April 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” This ASU relates to discontinued operations reporting for disposals of components of an entity that represent strategic shifts that have, or will have, a major effect on an entity’s operations and financial results. The standard expands the disclosures for discontinued operations and requires new disclosures related to individually material disposals that do not meet the definition of a discontinued

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operation. The amendments are effective for annual periods beginning after December 15, 2014 and subsequent interim periods. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers,” which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. On April 29, 2015, the FASB issued a proposal to defer the effective date for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted as of the original effective date, which is annual reporting periods beginning after December 15, 2016 and subsequent interim periods. Comments on the proposal are due by May 29, 2015. The new standard is to be applied retrospectively and permits the use of either the retrospective or cumulative effect transition method. Barnwell is currently evaluating the effect that the adoption of this update will have on the consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” which requires an entity to evaluate at each reporting period whether there are conditions or events, in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year from the date the financial statements are issued and to provide related footnote disclosures in certain circumstances. The guidance is effective for interim and annual reporting periods beginning after December 15, 2016. Early application is permitted. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In January 2015, the FASB issued ASU 2015-01, “Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which eliminates the concept of an extraordinary item from GAAP. As a result, an entity will no longer be required to separately classify, present and disclose extraordinary events and transactions. The amendment is effective for annual reporting periods beginning after December 15, 2015 and subsequent interim periods. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis," which simplifies the current consolidation guidance and will require companies to reevaluate limited partnerships and similar entities for consolidation. The amendment is effective for annual reporting periods beginning after December 15, 2015 and subsequent interim periods. Barnwell is currently evaluating the effect that the adoption of this update will have on the consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs." This amendment was issued to simplify the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. This will make the presentation of debt issuance costs consistent with the presentation of debt discounts or premiums. The amendment is effective for annual reporting periods beginning after December 15, 2015 and subsequent interim periods, with early adoption permitted. The adoption of this update is not expected to have a material impact on Barnwell’s consolidated financial statements.

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Overview

Barnwell is engaged in the following lines of business: 1) exploring for, developing, acquiring, producing and selling oil and natural gas in Canada (oil and natural gas segment), 2) investing in land interests in Hawaii (land investment segment), 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling segment), and 4) developing homes for sale in Hawaii (residential real estate segment).

Oil and Natural Gas Segment

Barnwell is involved in the acquisition, exploration and development of oil and natural gas properties in Canada where we acquire or initiate and participate in exploratory and developmental operations for oil and natural gas on properties in which we have an interest, and evaluate proposals by third parties with regard to participation in such exploratory and developmental operations elsewhere.

Land Investment Segment

The land investment segment is comprised of the following components:

1)   Through Barnwell’s 77.6% controlling interest in Kaupulehu Developments, a Hawaii general partnership, 75% controlling interest in KD Kona 2013 LLLP, a Hawaii limited liability limited partnership, and 34.45% non-controlling interest in KKM Makai, LLLP, a Hawaii limited liability limited partnership, the Company’s land investment interests include the following:

• The right to receive payments from KD Acquisition, LLLP (“KD I”) and KD Acquisition II, LLLP (“KD II”), resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area, located approximately six miles north of the Kona International Airport in the North Kona District of the island of Hawaii, adjacent to Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean, by KD I and KD II in two increments (“Increment I” and “Increment II”). Increment I is an area zoned for approximately 80 single-family lots and a beach club on the portion of the property bordering the Pacific Ocean, and is partially developed. The purchasers of the 80 single-family lots will have the right to apply for membership in the Kuki`o Golf and Beach Club, which is located adjacent to and south of the Four Seasons Resort Hualalai at Historic Ka`upulehu. Increment II is the remaining portion of the approximately 870-acre property and is zoned for single-family and multi-family residential units and a golf course and clubhouse. Two residential lots approximately two to three acres in size fronting the ocean are currently being developed within Increment II by KD II, and the remaining acreage within Increment II is not yet under development.

• An indirect 19.6% non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP. These entities own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KD Kaupulehu, LLLP, which wholly owns KD I and KD II, is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments.

• Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area located adjacent to the 870-acre Lot 4A described above.

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2)   Barnwell owns an 80% controlling interest in Kaupulehu 2007, LLLP (“Kaupulehu 2007”), a Hawaii limited liability limited partnership. Kaupulehu 2007 owns one residential parcel in the Kaupulehu area that is held for investment.

Contract Drilling Segment

Barnwell drills water and water monitoring wells and installs and repairs water pumping systems in Hawaii. Contract drilling results are highly dependent upon the quantity, dollar value and timing of contracts awarded by governmental and private entities and can fluctuate significantly.

Residential Real Estate Segment

Barnwell, through its 80%-owned real estate joint venture, Kaupulehu 2007, constructs and sells luxury single-family homes. Kaupulehu 2007, in addition to the parcel described above, owns a luxury residence in the Kaupulehu area that is available for sale. Kaupulehu 2007 does not currently have any homes under construction.

Changes in Business Environment

Oil and Natural Gas Segment

Our revenue, profitability, and future rate of growth are substantially dependent on oil and natural gas prices. The industry has experienced a significant decline in oil and natural gas prices in recent months that has negatively impacted our operating results, cash flows and liquidity. Barnwell realized an average price for oil of $35.70 per barrel during the three months ended March 31, 2015, down 55% from $79.28 per barrel realized during the same period in the prior year. Barnwell realized an average price for natural gas of $2.03 per Mcf during the three months ended March 31, 2015, down 58% from $4.88 per Mcf realized during the same period in the prior year.

On April 10, 2015, Barnwell’s credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provides for a decrease in the aggregate principal amount of the revolving credit facility to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate, from $11,800,000 Canadian dollars. This reduction in the borrowing capacity is largely due to significant declines in the bank’s forecast of oil and natural gas prices.

If recent low oil and natural gas prices are sustained, our oil and natural gas segment will continue to experience a significant reduction in cash flow available for acquiring and exploring for oil and natural gas reserves relative to the past and may experience a reduction in the amount of oil and natural gas that is economic to produce from our oil and natural gas properties, potential shut ins of certain oil and natural gas wells, and further reductions of our Canadian revolving credit facility borrowing capacity. Additionally, oil and natural gas prices affect the value of our oil and natural gas properties as determined in our full cost ceiling calculation and sustained low prices will result in future reductions of the full cost ceiling value which could result in future reductions of the carrying value of our oil and natural gas properties and a charge to operating results.

Negative impacts to our projected future oil and natural gas segment discretionary cash flow due to the decline in prices and other factors has resulted in the conclusion that it is not more likely than not that all of our deferred tax assets under Canadian tax law are realizable.  As a result, the Company has recorded

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a valuation allowance of $785,000 during the quarter ended March 31, 2015 for the portion of Canadian tax law deferred tax assets related to asset retirement obligations that may not be realizable. This valuation allowance has negatively impacted our financial results for the three and six months ended March 31, 2015. Additional valuation allowances for these deferred tax assets may be required in the future based on changes in facts and circumstances and future activity.

Results of Operations

Summary

Net loss attributable to Barnwell for the three months ended March 31, 2015 totaled $2,017,000, a $1,732,000decrease in operating results from a net loss of $285,000 for the three months ended March 31, 2014. The following factors affected the results of operations for the three months ended March 31, 2015 as compared to the prior year period:

• A $3,056,000decrease in oil and natural gas segment operating results, before income taxes, primarily due to a reduction in revenue due to decreases in prices and production for all products which was partially offset by a reduction in operating expenses and the benefit from a decreased depletion rate primarily as a result of divestitures of certain oil and natural gas properties in fiscal 2014;

• An $817,000increase in land investment segment operating profit, before income taxes and non-controlling interests’ share of such profits, due to increased percentage of sales receipts;

• A $202,000decrease in contract drilling operating results, before taxes, primarily resulting from decreased water well drilling activity partially offset by work on higher value water well drilling contracts and higher contract margins;

• A $785,000 valuation allowance recorded in the current year period for deferred tax assets under Canadian tax law related to asset retirement obligations which increased deferred income tax expense; and

• A $484,000increase in the equity in income of our affiliates as a result of increased lot sales by the Kukio Resort land development partnerships.

Barnwell incurred a net loss of $2,484,000 for the six months ended March 31, 2015, a $1,210,000decrease in operating results from a net loss of $1,274,000 for the six months ended March 31, 2014. The following factors affected the results of operations for the six months ended March 31, 2015 as compared to the prior year period:

• A $3,237,000decrease in oil and natural gas segment operating results, before income taxes, primarily due to a reduction in revenue due to decreases in production for all products partially offset by a reduction in operating expenses and the benefit from a decreased depletion rate all primarily related to the divestitures of certain oil and natural gas properties in fiscal 2014, as well as decreases in prices for all products;

• A $1,729,000increase in land investment segment operating profit, before income taxes and non-controlling interests’ share of such profits, due to increased percentage of sales receipts;

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• A $785,000 valuation allowance recorded in the current year period for deferred tax assets under Canadian tax law related to asset retirement obligations which increased deferred income tax expense; and

• A $719,000increase in the equity in income of our affiliates as a result of increased lot sales by the Kukio Resort land development partnerships.

General

Barnwell conducts operations in the U.S. and Canada. Consequently, Barnwell is subject to foreign currency translation and transaction gains and losses due to fluctuations of the exchange rates between the Canadian dollar and the U.S. dollar. Barnwell cannot accurately predict future fluctuations of the exchange rates and the impact of such fluctuations may be material from period to period. To date, we have not entered into foreign currency hedging transactions.

The average exchange rate of the Canadian dollar to the U.S. dollar decreased 11% and 9% in the three and six months ended March 31, 2015, respectively, as compared to the same periods in the prior year, and the exchange rate of the Canadian dollar to the U.S. dollar decreased 12% at March 31, 2015, as compared to September 30, 2014. Accordingly, the assets, liabilities, stockholders’ equity and revenues and expenses of Barnwell’s subsidiaries operating in Canada have been adjusted to reflect the change in the exchange rates. Barnwell’s Canadian dollar assets are greater than its Canadian dollar liabilities; therefore, increases or decreases in the value of the Canadian dollar to the U.S. dollar generate other comprehensive income or loss, respectively. Other comprehensive income and losses are not included in net loss. Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for the three months ended March 31, 2015 was $772,000, a $149,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $921,000 for the same period in the prior year. Other comprehensive loss due to foreign currency translation adjustments, net of taxes, for the six months ended March 31, 2015 was $1,179,000, a $522,000 change from other comprehensive loss due to foreign currency translation adjustments, net of taxes, of $1,701,000 for the same period in the prior year. There were no taxes on other comprehensive loss due to foreign currency translation adjustments in the three and six months ended March 31, 2015 and 2014 due to a full valuation allowance on the related deferred tax asset.

Oil and natural gas

The following tables set forth Barnwell’s average prices per unit of production and net production volumes. Production amounts reported are net of royalties.

	Average Price Per Unit
	Three months ended				Increase
	March 31,				(Decrease)
	2015		2014		$			%
Natural Gas (Mcf)*	$	2.03	$	4.88	$	(2.85	)	(58	%)
Oil (Bbls)**	$	35.70	$	79.28	$	(43.58	)	(55	%)
Liquids (Bbls)**	$	15.94	$	50.39	$	(34.45	)	(68	%)

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	Average Price Per Unit
	Six months ended				Increase
	March 31,				(Decrease)
	2015		2014		$			%
Natural Gas (Mcf)*	$	2.47	$	3.86	$	(1.39	)	(36	%)
Oil (Bbls)**	$	48.16	$	76.21	$	(28.05	)	(37	%)
Liquids (Bbls)**	$	22.14	$	46.94	$	(24.80	)	(53	%)

	Net Production
	Three months ended		Increase
	March 31,		(Decrease)
	2015	2014	Units		%
Natural Gas (Mcf)*	461,000	473,000	(12,000	)	(3	%)
Oil (Bbls)**	20,000	39,000	(19,000	)	(49	%)
Liquids (Bbls)**	18,000	18,000	—		—	%

	Net Production
	Six months ended		Increase
	March 31,		(Decrease)
	2015	2014	Units		%
Natural Gas (Mcf)*	900,000	1,026,000	(126,000	)	(12	%)
Oil (Bbls)**	37,000	76,000	(39,000	)	(51	%)
Liquids (Bbls)**	36,000	37,000	(1,000	)	(3	%)

_______________________________________

*            Mcf = 1,000 cubic feet.  Natural gas price per unit is net of pipeline charges.

**          Bbl = stock tank barrel equivalent to 42 U.S. gallons

Oil and natural gas revenues decreased $4,305,000 (67%) and $6,660,000 (57%) for the three and six months ended March 31, 2015, respectively, as compared to the same periods in the prior year due to decreases in production for all products as a result of divestitures of certain oil and natural gas properties in fiscal 2014 as well as from natural declines in production from older properties and decreases in prices realized for all products. The declines in net natural gas production were partially offset by lower royalty rates realized in the current year periods as a result of lower natural gas prices.

The oil and natural gas segment generated a $498,000 operating loss before general and administrative expenses in the three months ended March 31, 2015, a decrease in operating results of $3,056,000 as compared to the $2,558,000 operating profit generated during the same period of the prior year. Operating profit decreased due to the significant decrease in revenue discussed above, partially offset by a decrease of $224,000 (11%) in oil and natural gas operating expenses and a decrease of $1,025,000 (57%) in depletion for the three months ended March 31, 2015, as compared to the same period in the prior year.

Oil and natural gas operating expenses for the three months ended March 31, 2015 decreased primarily as a result of a decrease of $267,000 due to divestitures of certain oil and natural gas properties in fiscal 2014 and an 11% decrease in the average exchange rate of the Canadian dollar to the U.S. dollar that decreased oil and natural gas operating expenses $226,000 as compared to the same period in the prior year. These decreases were partially offset by approximately $160,000 of costs incurred during the current year period

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related to an oil and salt water spill that occurred at one of our operated properties which includes our insurance deductible, estimated penalties and legal costs and estimated future monitoring costs. Additionally, there was a $70,000 increase in the accretion of asset retirement obligations in the current year period as a result of an increase in the asset retirement obligation liability as compared to the prior year period due to revised retirement costs.

The oil and natural gas segment generated a $32,000 operating loss before general and administrative expenses in the six months ended March 31, 2015, a decrease in operating results of $3,237,000 as compared to the $3,205,000 operating profit generated during the same period of the prior year. Operating results decreased due to the significant decrease in revenue discussed above, partially offset by a decrease of $1,222,000 (26%) in oil and natural gas operating expenses and a decrease of $2,201,000 (57%) in depletion for the six months ended March 31, 2015, as compared to the same period in the prior year.

Oil and natural gas operating expenses for the six months ended March 31, 2015 decreased primarily due to lower production for all products as a result of natural declines in production, a decrease of $590,000 due to divestitures of certain oil and natural gas properties in fiscal 2014 and a 9% decrease in the average exchange rate of the Canadian dollar to the U.S. dollar that decreased oil and natural gas operating expenses $359,000 as compared to the same period in the prior year.

Oil and natural gas segment depletion decreased for the three and six ended March 31, 2015 and 2014 primarily due to a 43% and 40% respective decrease in the depletion rates as a result of divestitures of certain oil and natural gas properties in fiscal 2014 as the proceeds from the sales were credited to the oil and natural gas cost pools in accordance with the full cost method, which resulted in a decrease in the future depletable base. Further contributing to the decrease in depletion for the three months ended March 31, 2015, there was a 15% decrease in net production and an 11% decrease in the average exchange rate of the Canadian dollar to the U.S. dollar as compared to the same period in the prior year. There was a 21% decrease in net production and an 9% decrease in the average exchange rate of the Canadian dollar to the U.S. dollar for the six months ended March 31, 2015 as compared to the same period in the prior year.

Sale of interest in leasehold land

Kaupulehu Developments is entitled to receive a percentage of the gross receipts from the sales of single-family residential lots in Increment I from KD I, a land development partnership in which Barnwell holds an indirect 19.6% non-controlling ownership interest accounted for under the equity method of investment. The percentage payments are part of a 2004 transaction where Kaupulehu Developments sold its leasehold interest in Increment I to KD I, which was prior to Barnwell’s affiliation with KD I on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort land development partnerships.

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The following table summarizes the percentage of sales payment revenues received from KD I:

	Three months ended   March 31,					Six months ended   March 31,
	2015			2014		2015			2014
Sale of interest in leasehold land:
Proceeds	$	950,000		$	—	$	2,150,000		$	140,000
Fees	(133,000		)	—		(301,000		)	(20,000		)
Revenues – sale of interest in leasehold land, net	$	817,000		$	—	$	1,849,000		$	120,000

KD I sold six contiguous single-family lots within Phase I of Increment I to a single buyer and two single-family lots within Phase II of Increment I during the first quarter of fiscal 2015, and an additional three single-family lots within Phase II of Increment I during the second quarter of fiscal 2015. No lots were sold during the three months ended March 31, 2014 and there was a sale of one single-family lot in Phase I of Increment I during the first quarter of fiscal 2014. The lot sale during the prior year period occurred prior to the acquisition of our ownership interest in the Kukio Resort land development partnerships.

As of March 31, 2015, all of the 38 single-family lots in Phase I of Increment I have been sold by KD I. Forty-two single-family lots are planned for Phase II of Increment I, for a total of 80 single-family lots planned for Increment I. The developer released and began marketing a portion of the 42 single-family lots in Phase II of Increment I, and as of March 31, 2015, eight of the lots have been sold. Two residential lots approximately two to three acres in size fronting the ocean are also currently being developed within Increment II by KD II, and the remaining acreage within Increment II is not yet under development. It is uncertain when or if KD II will develop the other areas of Increment II, and there is no assurance with regards to the amounts of future sales from Increments I and II.

Contract drilling

Contract drilling revenues and contract drilling costs decreased$827,000 (63%) and $617,000 (57%), respectively, for the three months ended March 31, 2015, as compared to the same period in the prior year. The contract drilling segment generated a $51,000 operating loss before general and administrative expenses in the three months ended March 31, 2015, a decrease in operating results of $202,000 as compared to the $151,000 operating profit generated during the same period of the prior year. Contract drilling revenues and contract drilling costs decreased$503,000 (17%) and $404,000 (17%), respectively, for the six months ended March 31, 2015, as compared to the same period in the prior year. The contract drilling segment generated a $286,000 operating profit before general and administrative expenses in the six months ended March 31, 2015, a decrease in operating results of $84,000 as compared to the $370,000 operating profit generated during the same period of the prior year. The decreases in operating results were primarily due to decreased water well drilling activity partially offset by work on higher value water well drilling contracts and higher contract margins.

Contract drilling revenues and costs are not seasonal in nature, but can fluctuate significantly based on the awarding and timing of contracts, which are determined by contract drilling customer demand. There has been significant volatility in demand for water well drilling contracts in recent years due largely to the impact of the recession and reduced governmental capital improvement budgets. This has generally led to increased competition for available contracts and lower margins on awarded contracts. The Company is

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unable to predict the near-term and long-term availability of water well drilling and pump installation and repair contracts as a result of this volatility in demand.

General and administrative expenses

General and administrative expenses decreased$197,000 (9%) for the three months ended March 31, 2015, as compared to the same period in the prior year. The decrease was primarily due to a $228,000 decrease in professional services due to legal costs and costs associated with the accounting for the acquisition of ownership interests in the land development partnerships incurred in the prior year period and a $122,000 decrease in current compensation costs due to cost reduction efforts which were partially offset by a $146,000 foreign currency transaction loss recognized in the current year period.

General and administrative expenses increased$222,000 (5%) for the six months ended March 31, 2015, as compared to the same period in the prior year. The increase was primarily due to a $192,000 decrease in administrative expense reimbursements from oil and natural gas joint venture partners, an increase in share-based compensation expense primarily due to the fact that general and administrative expenses in the prior year period included a $190,000 reduction in share-based compensation expense as compared to a $47,000 reduction in share-based compensation expense in the current year period and a $146,000 foreign currency transaction loss recognized in the current year period. These increases were partially offset by a $179,000 decrease in professional services due to legal costs and costs associated with the accounting for the acquisition of ownership interests in the land development partnerships incurred in the prior year period and a $76,000 decrease in current compensation costs due to cost reduction efforts.

Depletion, depreciation, and amortization

Depletion, depreciation, and amortization decreased$1,036,000 (54%) and $2,221,000 (55%) for the three and six months ended March 31, 2015, respectively, as compared to the same periods in the prior year primarily due to the decrease in the oil and natural gas segment depletion as discussed above.

Interest expense

Interest expense decreased $110,000 (57%) and $183,000 (52%) for the three and six months ended March 31, 2015, respectively, as compared to the same periods in the prior year primarily due to the decrease in average outstanding debt balances as Barnwell repaid $5,000,000 of the Canadian credit facility during the second and third quarters of fiscal 2014 and an additional $2,000,000 during the current quarter and as a result of the land investment loan which Barnwell obtained on November 27, 2013 and paid in full in September 2014.

Equity in income (loss) of affiliates

Barnwell’s investment in the Kukio Resort land development partnerships is accounted for using the equity method of accounting. Barnwell was allocated partnership income of $368,000 and $456,000 during the three and six months ended March 31, 2015, respectively, as compared to allocated losses of $116,000 and $263,000 during the three and six months ended March 31, 2014, respectively.

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Income taxes

Barnwell’s effective consolidated income tax rate for the three and six months ended March 31, 2015, after adjusting loss before income taxes for non-controlling interests, was (24%) and (14%), respectively, as compared to 225% and (55%) for the three and six months ended March 31, 2014, respectively. 

As a result of significant declines in prices, funds available for oil and natural gas capital expenditures are projected to be minimal in the near term and thus Barnwell's ability to replace production and abate declining reserves has been significantly restricted as compared to the recent past. Accordingly, Barnwell has determined that it is not more likely than not that all of our oil and natural gas deferred tax assets under Canadian tax law are realizable. As such, during the quarter ended March 31, 2015, a valuation allowance of $785,000, which increased deferred income tax expense, was recorded for the portion of Canadian tax law deferred tax assets related to asset retirement obligations that may not be realizable.

Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that Canadian taxable income is not sheltered by U.S. source losses, Canadian income taxes are not estimated to have a current or future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses are not estimated to have any future U.S. tax benefit prior to expiration. In addition, consolidated taxes in the current year periods include the aforementioned valuation allowance for a portion of deferred tax assets under Canadian tax law.

Net income (loss) attributable to non-controlling interests

Earnings and losses attributable to non-controlling interests represent the non-controlling interests’ share of revenues and expenses related to the various partnerships and joint ventures in which Barnwell has interests.

Net income attributable to non-controlling interests for the three months ended March 31, 2015 totaled $144,000, as compared to net loss attributable to non-controlling interests of $39,000 for the same period in the prior year. Net income attributable to non-controlling interests for the six months ended March 31, 2015 totaled $328,000, as compared to net loss attributable to non-controlling interests of $50,000 for the same period in the prior year. The $183,000 (469%) and $378,000 (756%) changes are due primarily to greater percentage of sales proceeds received in the current year periods as compared to the same periods in the prior year.

Liquidity and Capital Resources

Barnwell’s primary sources of liquidity are cash on hand and land investment segment proceeds. At March 31, 2015, Barnwell had $9,097,000 in cash and cash equivalents and $8,207,000 in working capital.

Cash Flows

Cash flows used in operations totaled $4,443,000 for the six months ended March 31, 2015, as compared to cash flows provided by operations of $3,010,000 for the same period in the prior year. This $7,453,000decrease was primarily due to lower oil and natural gas segment operating results and changes in working capital primarily related to the demands by certain oil and natural gas operators for accelerated joint interest billing payments and advance payments made related to the oil and salt water spill that occurred in the current period that have not yet been reimbursed by working interest owners and insurance.

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Cash flows provided by investing activities totaled $950,000 during the six months ended March 31, 2015, as compared to $4,922,000 of net cash used in investing activities during the same period of the prior year. The change was primarily due to a $5,140,000 payment in the prior year period to acquire interests in the Kukio Resort land development partnerships and a $1,729,000 increase in percentage of sales proceeds received in the current year period, which was partially offset by a $1,218,000 net increase in oil and natural gas segment investing cash flows related to capital expenditures and payments and proceeds to acquire and sell oil and natural gas properties in the current year period.

Net cash used in financing activities totaled $2,689,000 for the six months ended March 31, 2015, as compared to $1,363,000 of cash flows provided by financing activities during the same period of the prior year. The $4,052,000 change in cash flows was primarily due to $3,230,000 of net proceeds from debt borrowings in the prior year period, primarily due to the land investment loan which was obtained during the prior year period, as compared to $2,445,000 in debt repayments in the current year period, primarily due to $2,000,000 in repayments on the Canadian credit facility. The change in net debt proceeds and repayments was partially offset by a $1,947,000 increase in restricted cash in the prior year period related to the land investment loan.

Credit Arrangements

On April 10, 2015, Barnwell’s credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provides for a decrease in the aggregate principal amount of the revolving credit facility to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate of 0.7885, from $11,800,000 Canadian dollars. This reduction in the borrowing capacity is largely due to significant declines in the bank’s forecast of oil and natural gas prices. The other material terms of the credit facility remain unchanged.

In February 2015, Barnwell repaid $2,000,000 of the credit facility at Royal Bank of Canada. During the three and six months ended March 31, 2015, Barnwell realized a foreign currency transaction loss of $146,000 as a result of the repayment of U.S. dollar denominated debt using Canadian dollars.

Borrowings under this facility were US$5,000,000 at March 31, 2015. The interest rate on the facility at March 31, 2015 was 2.67%. The renewed facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.50%, at Royal Bank of Canada’s U.S. base rate plus 1.50%, or in Canadian dollars at Royal Bank of Canada’s prime rate plus 1.50%. A standby fee of 0.625% per annum is charged on the unused facility balance.

Barnwell, together with its 80%-owned real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank that terminates on April 1, 2018. In January 2015, the loan was amended which amended the monthly principal and interest payments to monthly interest-only payments effective February 1, 2015. All other terms of the loan remained unchanged. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at March 31, 2015 was 3.41% and was adjusted to 3.59% effective April 1, 2015. The principal balance and any accrued interest will be due and payable on April 1, 2018. The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or the residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

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The non-revolving real estate loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio of not less than 1.20 to 1 and a consolidated total liabilities to tangible net worth ratio not to exceed 1.85 to 1. At March 31, 2015, the Company was in violation as a result of exceeding the maximum consolidated total liabilities to tangible net worth ratio. As a result, the Company triggered an event of default under the loan agreement, and the bank could have caused all of the Company’s loan borrowings under the loan agreement to immediately become due and payable. However, the Company obtained a waiver from the bank for non-compliance with the covenant.

Oil and Natural Gas and Other Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding additions and revisions to estimated asset retirement obligations, totaled $460,000 and $859,000 for the three and six months ended March 31, 2015, respectively, as compared to $505,000 and $2,203,000 for the same periods in the prior year. Management expects that oil and natural gas capital expenditures and expenditures for potential acquisitions of oil and natural gas properties in fiscal 2015 will range from $1,000,000 to $2,000,000. This estimated amount will increase or decrease as dictated by cash flows and management’s assessment of the oil and natural gas environment and prospects.

Acquisition of Oil and Natural Gas Properties

On November 13, 2014, Barnwell completed the acquisition of additional non-operated working interests in oil and natural gas properties located in the Progress area of Alberta, Canada for cash consideration of $526,000, subject to further customary post-closing adjustments. The final determination of the customary adjustments to the purchase price will be made by the parties approximately 180 days after closing.

Other Considerations

Management is working to improve the Company’s liquidity by, among other things, exploring the sale of certain of its oil and natural gas properties. Management anticipates that such sales will be required to sustain the Company’s operations in the future. However, there can be no assurance that the Company will be successful in securing the sale of any of its oil and natural gas properties.

Because of the impact of recent declines in oil and natural gas prices on our oil and natural gas segment, Barnwell estimates that it will be heavily reliant upon land investment segment proceeds in order to provide liquidity to fund our operations in the near term. Although there has been a recent increase in land investment segment proceeds, there can be no assurance that this trend will continue or that the amount of future land investment segment proceeds will provide the liquidity required.

In addition, absent a sufficient sustained increase in natural gas and/or oil prices, future oil and natural gas operating cash flows will not be sufficient to fund the reserve acquisition or capital expenditure levels necessary to replace declining oil and natural gas reserves.

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If oil and natural gas prices do not increase sufficiently, land investment segment proceeds and residential real estate home sale proceeds are less than current expectations, Barnwell’s Canadian revolving credit facility is further reduced below the level of borrowings under the facility upon the April 2016 review, and/or we fall short of our key financial debt covenants for our real estate loan and are required to repay all or a portion of our loan borrowings earlier than anticipated, there will be a material adverse effect on our operations, liquidity, cash flows and financial condition, and the Company will need to obtain alternative terms or sources of financing or liquidate investments and/or operating assets to make any required cash outflows. Our liquidity issues may force us to curtail existing operations, reduce or delay capital expenditures, or sell assets on less favorable terms. There can be no assurance the Company will be able to secure the sale of any of its oil and natural gas properties or realize enough proceeds from such sales to fund its operations, or to otherwise resolve its liquidity issues.

Contingencies

Environmental Matters

In January 2015, there was an oil and salt water spill at one of our operated oil properties in Alberta, Canada. We have estimated that probable environmental remediation costs will be approximately $2,300,000. Barnwell’s working interest in the well is 58% and we expect to recover monies from the other working interest owners for their share of the costs and have accordingly recorded a receivable of $894,000 at March 31, 2015. Additionally, we have filed a claim under our insurance policy, which has a deductible of approximately $80,000, and based on discussions with our insurer we currently believe it is probable that these clean up expenses will be covered by insurance, and as such, a receivable of $1,156,000 was recorded at March 31, 2015, which represents the estimated recovery amount. The total estimated net financial impact for Barnwell, which includes the insurance deductible, estimated legal fees and estimated monitoring and other costs is approximately $160,000, which has been recorded in the three and six months ended March 31, 2015.

Environmental remediation costs for the oil and salt water spill have not been discounted and were accrued in “Accounts payable” on the Condensed Consolidated Balance Sheets. At March 31, 2015, the gross liability was $1,349,000.

At March 31, 2015 and September 30, 2014, environmental remediation costs of $401,000 and $501,000, respectively, were accrued for the estimated liability for probable environmental remediation costs for soil contamination from infrastructure issues at the Dunvegan and Wood River properties in which we own a non-operating working interest. The estimated liability is based on authorization for expenditure requests and cost estimates received by Barnwell from the property operators in 2013. Environmental remediation costs for Dunvegan and Wood River have not been discounted and were accrued in “Accrued operating and other expenses” on the Condensed Consolidated Balance Sheets.

Because of the inherent uncertainties associated with environmental assessment and remediation activities, future expenses to remediate the currently identified sites, and sites identified in the future, if any, could be incurred.

Guarantee

See Note 6 for a discussion of Barnwell’s guarantee of the Kukio Resort land development partnership’s performance bonds.

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ITEM 4.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to Barnwell, including its consolidated subsidiaries, is made known to the officers who certify Barnwell’s financial reports and to other members of executive management and the Board of Directors.

As of March 31, 2015, an evaluation was carried out by Barnwell’s Chief Executive Officer and Chief Financial Officer of the effectiveness of Barnwell’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Barnwell’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of March 31, 2015 to ensure that information required to be disclosed by Barnwell in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities Exchange Act of 1934 and the rules thereunder.

Changes in Internal Control Over Financial Reporting

There was no change in Barnwell’s internal control over financial reporting during the quarter ended March 31, 2015 that materially affected, or is reasonably likely to materially affect, Barnwell’s internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1A.    RISK FACTORS

Other than as set forth below, there have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended September 30, 2014.

The recent substantial declines in oil and natural gas prices have adversely affected our business, financial condition, cash flow, liquidity and results of operations as well as our capital resources and our ability to meet the level of capital expenditures necessary to implement our business plan.

Much of our revenues, cash flow and profitability are greatly dependent upon prevailing prices for oil and natural gas. Our ability to maintain or increase our borrowing capacity and to obtain additional capital on attractive terms is also dependent on oil and natural gas prices. Lower oil and natural gas prices not only decrease our revenues on a per unit basis, but also reduce the amount of oil and natural gas we can produce economically, if any.

As of March 31, 2015, Barnwell had $9,097,000 in cash and cash equivalents and $8,207,000 in working capital. On April 10, 2015, Barnwell’s credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provides for a decrease in the aggregate principal amount of the revolving credit facility to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate, from $11,800,000 Canadian dollars, and leaves Barnwell with no available credit at the current exchange rate. This reduction in the borrowing capacity is largely due to significant declines in the bank’s forecast of oil and natural gas prices. Furthermore, unless there are significant sustained increases in oil and natural gas prices in the near future, or Barnwell is able to acquire or find and develop additional sources of production, because of depleting reserves, we would expect that the Canadian credit facility would be further reduced and we would have to use additional cash reserves to pay down debt.

Based on these expected operating losses in our oil and natural gas segment due to lower oil and natural gas prices, we anticipate that there will be near term, significant reductions in our cash reserves and our liquidity. This expected reduction in liquidity also may cause us to reduce planned capital expenditures in our oil and natural gas segment which could adversely affect our ability to add or grow oil and natural gas reserves.

Our real estate loan agreement contains provisions requiring us to maintain compliance with certain covenants, including a consolidated total liabilities to tangible net worth ratio not to exceed 1.85 to 1. We failed to comply with this covenant at March 31, 2015. As a result, the Company triggered an event of default under the loan agreement, and the bank could have caused all of the Company’s loan borrowings under the loan agreement to immediately become due and payable. However, the Company has obtained a waiver from the bank. There can be no assurance that the Company will be able to obtain compliance with this covenant by June 30, 2015.

In addition, absent a sufficient increase in oil and/or natural gas prices, future oil and natural gas operating cash flows will not be sufficient to fund the reserve acquisition or capital expenditure levels necessary to replace declining oil and natural gas reserves. Because of the impact of recent declines in oil and natural gas prices, we will be heavily reliant upon land investment segment proceeds in order to provide liquidity to fund our operations in the near term. And although there has been a recent increase in land investment segment proceeds, there can be no assurance that this trend will continue or that the amount of future land investment segment proceeds will provide the liquidity required.

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Management is working to improve the Company’s liquidity by, among other things, exploring the sale of certain of its oil and natural gas properties. Management anticipates that such sales will be required to sustain the Company’s operations in the future. However, there can be no assurance that the Company will be successful in securing the sale of any of its oil and natural gas properties.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

A discussion of the default under our real estate loan agreement can be found under the heading “Liquidity and Capital Resources” in Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

ITEM 6.    EXHIBITS

Exhibit Number	Description
10.10	Amended and Restated Credit Facility Agreement dated as of May 11, 2006 between Barnwell of Canada, Limited, as the borrower, and Royal Bank of Canada, as the lender, as amended
10.11	Loan Agreement, dated as of March 28, 2011 between Kaupulehu 2007 LLLP and Barnwell Industries, Inc., as the borrowers, and American Savings Bank, F.S.B. as the lender, as amended
31.1	Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		BARNWELL INDUSTRIES, INC.
		(Registrant)
Date:	May 13, 2015	/s/ Russell M. Gifford
		Russell M. Gifford
		Chief Financial Officer,
		Executive Vice President,
		Treasurer and Secretary

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INDEX TO EXHIBITS

Exhibit Number	Description
10.10	Amended and Restated Credit Facility Agreement dated as of May 11, 2006 between Barnwell of Canada, Limited, as the borrower, and Royal Bank of Canada, as the lender, as amended
10.11	Loan Agreement, dated as of March 28, 2011 between Kaupulehu 2007 LLLP and Barnwell Industries, Inc., as the borrowers, and American Savings Bank, F.S.B. as the lender, as amended
31.1	Certification of Chief Financial Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Executive Officer Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

43

EX-10.10

Exhibit No. 10.10

THIS AMENDING AGREEMENT made as of the 1st day of April, 2015 (the “Amending Agreement”).

BETWEEN:	(1)	ROYAL BANK OF CANADA,
		a Canadian chartered bank
		(hereinafter referred to as the “Bank”)
AND:	(2)	BARNWELL OF CANADA, LIMITED,
		incorporated under the laws of the State of Delaware
		(hereinafter referred to as the “Borrower”)

WHEREAS the Bank has made available to the Borrower a credit facility pursuant to a credit agreement between the parties hereto dated May 11, 2006 (the “Original Credit Agreement”), as amended to date (each amendment being an “Amendment”, (collectively, the Original Credit Agreement and each Amendment being the “Credit Agreement”);

AND WHEREAS the Bank and the Borrower have agreed to extend the Term Date and to make certain other changes to the Credit Agreement;

NOW THEREFORE, for valuable consideration received and in consideration of the mutual promises contained in this Amending Agreement, the parties hereto, subject to the terms of this Amending Agreement, hereby amend the Credit Agreement as follows:

1. DEFINITIONS:

Except as otherwise expressly provided herein, words and expressions defined in the Credit Agreement, when used in this Amending Agreement or in the recitals hereto, have the meanings given to them in the Credit Agreement. All references to pages, lines, sections and headings are to pages, lines, sections and headings of the Credit Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT:

The following amendments are hereby made to the Credit Agreement:

(a) In the section headed “Credit Facility”, delete $11,800,000 and replace with $6,500,000.

(b) in Schedule “A” headed “Definitions, delete the date reference in the definition “Term Date” and replace with “April 29, 2016”; and

3. CONDITIONS PRECEDENT:

The conditions precedent to the obligations of the Bank under this Amending Agreement are that the Bank shall have received (i) a copy of this Amending Agreement duly executed by the Borrower, and (ii) the sum of $6,500 by way of payment of an extension fee, in each case on or before April 29, 2015.

4. REPRESENTATIONS AND WARRANTIES:

The execution of this Amending Agreement shall be deemed for all purposes to constitute:

(a) fresh representations and warranties by the Borrower in the terms contained in the Credit Agreement; and

(b) the Borrower’s confirmation that no event which constitutes, or which, with the giving of notice and/or lapse of time, would constitute an Event of Default, has occurred and is continuing or would result by reason of the execution of and delivery of this Amending Agreement.

5. FURTHER ACTS:

The Borrower and the Bank agree to do all such further acts or things and to execute and to deliver all such deeds, instruments and other writings as may be necessary or advisable to give full effect to this Amending Agreement.

6. INCORPORATION:

Upon the provisions of this Amending Agreement coming into force, this Amending Agreement shall be construed as one with the Credit Agreement. Accordingly, the Credit Agreement shall, where the context so requires, be read and construed throughout so as to incorporate the amendments set out herein.

7. RATIFICATION OF THE CREDIT AGREEMENT:

Except as amended by this Amending Agreement, all terms and conditions of the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed in every respect. The Borrower further ratifies and confirms execution of the Original Credit Agreement and each Amendment as proper acts of the Borrower.

8. NON WAIVER:

Nothing contained herein shall be deemed to be a waiver by the Bank of any Event of Default or of any breach of any covenant or other term or condition of the Credit Agreement or any

security agreement given in connection therewith, or a waiver of, or to alter, affect or prejudice any right or remedy of the Bank.

9. GOVERNING LAW:

The agreement embodied in this Amending Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein. The Borrower attorns to the jurisdiction of the courts of the Province of Alberta.

10. SUCCESSORS AND ASSIGNS:

This Amending Agreement shall enure to the benefit of and be binding on the parties and their successors and permitted assigns.

11. COUNTERPARTS:

This Amending Agreement may be executed in any number of counterparts, including via facsimile transmission, and all such counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties hereto have duly executed this Amending Agreement as of the date first written above.

ROYAL BANK OF CANADA
By:	/s/ Maria Hushovd
	Name: Maria Hushovd
	Authorized Signatory
BARNWELL OF CANADA, LIMITED
By:	/s/ Russell M. Gifford
Title:		Vice President & Chief Financial Officer
By:	/s/ Lloyd Arnason
Title:		President & Chief Operating Officer
		Barnwell of Canada Limited

We have the authority to bind the Borrower.

We acknowledge the terms and conditions of this Amending Agreement this 10th day of April, 2015.

BARNWELL INDUSTRIES, INC.
By:	/s/ Russell M. Gifford
Title:		Executive Vice President & Chief Financial Officer
By:	/s/ Alexander C. Kinzler
Title:		President & Chief Operating Officer

We have the authority to bind the Guarantor.

THIS AMENDING AGREEMENT made as of the 23rd day of April, 2014 (the “Amending Agreement”).

BETWEEN:	(1)	ROYAL BANK OF CANADA,
		a Canadian chartered bank
		(hereinafter referred to as the “Bank”)
AND:	(2)	BARNWELL OF CANADA, LIMITED,
		incorporated under the laws of the State of Delaware
		(hereinafter referred to as the “Borrower”)

WHEREAS the Bank has made available to the Borrower a credit facility pursuant to a credit agreement between the parties hereto dated May 11, 2006 (the “Original Credit Agreement”), as amended to date (each amendment being an “Amendment”, (collectively, the Original Credit Agreement and each Amendment being the “Credit Agreement”);

AND WHEREAS the Bank and the Borrower have agreed to extend the Term Date and to make certain other changes to the Credit Agreement;

NOW THEREFORE, for valuable consideration received and in consideration of the mutual promises contained in this Amending Agreement, the parties hereto, subject to the terms of this Amending Agreement, hereby amend the Credit Agreement as follows:

1. DEFINITIONS:

Except as otherwise expressly provided herein, words and expressions defined in the Credit Agreement, when used in this Amending Agreement or in the recitals hereto, have the meanings given to them in the Credit Agreement. All references to pages, lines, sections and headings are to pages, lines, sections and headings of the Credit Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT:

The following amendments are hereby made to the Credit Agreement:

(a) In the section headed “Credit Facility”, delete $20,000,000 and replace with $11,800,000.

(b) in Schedule “A” headed “Definitions”, delete the date reference in the definition “Term Date” and replace with “April 29, 2015”; and

3. CONDITIONS PRECEDENT:

The conditions precedent to the obligations of the Bank under this Amending Agreement are that the Bank shall have received (i) a copy of this Amending Agreement duly executed by the Borrower, and (ii) the sum of $11,800 by way of payment of an extension fee, in each case on or before April 29, 2014.

4. REPRESENTATIONS AND WARRANTIES:

The execution of this Amending Agreement shall be deemed for all purposes to constitute:

(a) fresh representations and warranties by the Borrower in the terms contained in the Credit Agreement; and

(b) the Borrower’s confirmation that no event which constitutes, or which, with the giving of notice and/or lapse of time, would constitute an Event of Default, has occurred and is continuing or would result by reason of the execution of and delivery of this Amending Agreement.

5. FURTHER ACTS:

The Borrower and the Bank agree to do all such further acts or things and to execute and to deliver all such deeds, instruments and other writings as may be necessary or advisable to give full effect to this Amending Agreement.

6. INCORPORATION:

Upon the provisions of this Amending Agreement coming into force, this Amending Agreement shall be construed as one with the Credit Agreement. Accordingly, the Credit Agreement shall, where the context so requires, be read and construed throughout so as to incorporate the amendments set out herein.

7. RATIFICATION OF THE CREDIT AGREEMENT:

Except as amended by this Amending Agreement, all terms and conditions of the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed in every respect. The Borrower further ratifies and confirms execution of the Original Credit Agreement and each Amendment as proper acts of the Borrower.

8. NON WAIVER:

Nothing contained herein shall be deemed to be a waiver by the Bank of any Event of Default or of any breach of any covenant or other term or condition of the Credit Agreement or any

security agreement given in connection therewith, or a waiver of, or to alter, affect or prejudice any right or remedy of the Bank.

9. GOVERNING LAW:

The agreement embodied in this Amending Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein. The Borrower attorns to the jurisdiction of the courts of the Province of Alberta.

10. SUCCESSORS AND ASSIGNS:

This Amending Agreement shall enure to the benefit of and be binding on the parties and their successors and permitted assigns.

11. COUNTERPARTS:

This Amending Agreement may be executed in any number of counterparts, including via facsimile transmission, and all such counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties hereto have duly executed this Amending Agreement as of the date first written above.

ROYAL BANK OF CANADA
By: /s/ Maria Hushovd
	Maria Hushovd
	Authorized Signatory
BARNWELL OF CANADA, LIMITED
By: /s/ Russell M. Gifford
Title: Vice President & Chief Financial Officer

We have the authority to bind the Borrower.

We acknowledge the terms and conditions of this Amending Agreement this 29th day of April, 2014.

BARNWELL INDUSTRIES, INC.

By: /s/ Russell M. Gifford

Title: Executive Vice President & Chief Financial Officer

We have the authority to bind the Guarantor.

THIS AMENDING AGREEMENT made as of the 22 day of March, 2013 (the “Amending Agreement”).

BETWEEN:	(1)	ROYAL BANK OF CANADA,
		a Canadian chartered bank
		(hereinafter referred to as the “Bank”)
AND:	(2)	BARNWELL OF CANADA, LIMITED,
		incorporated under the laws of the State of Delaware
		(hereinafter referred to as the “Borrower”)

WHEREAS the Bank has made available to the Borrower a credit facility pursuant to a credit agreement between the parties hereto dated May 11, 2006 (the “Original Credit Agreement”), as amended to date (each amendment being an “Amendment”, (collectively, the Original Credit Agreement and each Amendment being the “Credit Agreement”);

AND WHEREAS the Bank and the Borrower have agreed to extend the Term Date and to make certain other changes to the Credit Agreement;

NOW THEREFORE, for valuable consideration received and in consideration of the mutual promises contained in this Amending Agreement, the parties hereto, subject to the terms of this Amending Agreement, hereby amend the Credit Agreement as follows:

1. DEFINITIONS:

Except as otherwise expressly provided herein, words and expressions defined in the Credit Agreement, when used in this Amending Agreement or in the recitals hereto, have the meanings given to them in the Credit Agreement. All references to pages, lines, sections and headings are to pages, lines, sections and headings of the Credit Agreement.

2. AMENDMENTS TO THE CREDIT AGREEMENT:

The following amendments are hereby made to the Credit Agreement:

(a) In the section headed “Credit Facility”, delete clause (e) in its entirety and replace with “(e) Letters of Credit and Letters of Guarantee in Canadian currency or US currency”.;

(b) throughout the Credit Agreement, except in the Schedules, whenever the defined term “LC” is used, add the words “or LGs” immediately thereafter;

(c) in the section headed “Calculation and Payment of Interest and Fees” delete the heading “LCs” and the immediately following paragraph and replace with:

“LC and LG Fees

The Borrower shall pay an LC or LG fee on the date of issuance of such LC or LG in Canadian Dollars. Such fee shall be calculated on the face amount of the LC or LG issued (converted into the Equivalent Amount thereof in Canadian Dollars) and based on the number of days in the term thereof and a year of 365 days.”;

(d) in Schedule “A” headed “Definitions”, add the following immediately after the definition “Letter of Credit” or “LC”:

“Letter of Guarantee” or “LG” means a letter of guarantee issued by the Bank on behalf of the Borrower for the purpose of providing security to a third party that the Borrower will perform a contractual or financial obligation owed to such third party”;

(e) in Schedule “A” headed “Definitions, delete the date reference in the definition “Term Date” and replace with “April 29, 2014”; and

(f) in Schedule “C”, add the words “or LG” immediately following each use of the defined term “LC”.

3. CONDITIONS PRECEDENT:

The conditions precedent to the obligations of the Bank under this Amending Agreement are that the Bank shall have received (i) a copy of this Amending Agreement duly executed by the Borrower, and (ii) the sum of $20,000 by way of payment of an extension fee, in each case on or before April 20, 2013.

4. REPRESENTATIONS AND WARRANTIES:

The execution of this Amending Agreement shall be deemed for all purposes to constitute:

(a) fresh representations and warranties by the Borrower in the terms contained in the Credit Agreement; and

(b) the Borrower’s confirmation that no event which constitutes, or which, with the giving of notice and/or lapse of time, would constitute an Event of Default, has

occurred and is continuing or would result by reason of the execution of and delivery of this Amending Agreement.

5. FURTHER ACTS:

The Borrower and the Bank agree to do all such further acts or things and to execute and to deliver all such deeds, instruments and other writings as may be necessary or advisable to give full effect to this Amending Agreement.

6. INCORPORATION:

Upon the provisions of this Amending Agreement coming into force, this Amending Agreement shall be construed as one with the Credit Agreement. Accordingly, the Credit Agreement shall, where the context so requires, be read and construed throughout so as to incorporate the amendments set out herein.

7. RATIFICATION OF THE CREDIT AGREEMENT:

Except as amended by this Amending Agreement, all terms and conditions of the Credit Agreement shall remain in full force and effect and are hereby ratified and confirmed in every respect. The Borrower further ratifies and confirms execution of the Original Credit Agreement and each Amendment as proper acts of the Borrower.

8. NON WAIVER:

Nothing contained herein shall be deemed to be a waiver by the Bank of any Event of Default or of any breach of any covenant or other term or condition of the Credit Agreement or any security agreement given in connection therewith, or a waiver of, or to alter, affect or prejudice any right or remedy of the Bank.

9. GOVERNING LAW:

The agreement embodied in this Amending Agreement shall be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein. The Borrower attorns to the jurisdiction of the courts of the Province of Alberta.

10. SUCCESSORS AND ASSIGNS:

This Amending Agreement shall enure to the benefit of and be binding on the parties and their successors and permitted assigns.

11. COUNTERPARTS:

This Amending Agreement may be executed in any number of counterparts, including via facsimile transmission, and all such counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature page follows]

IN WITNESS WHEREOF the parties hereto have duly executed this Amending Agreement as of the date first written above.

ROYAL BANK OF CANADA
By: /s/ Debra Giles
	Debra Giles
	Authorized Signatory
BARNWELL OF CANADA, LIMITED
By: /s/ Russell M. Gifford
Title: Vice President & Chief Financial Officer

We have the authority to bind the Borrower.

We acknowledge the terms and conditions of this Amending Agreement this 28th day of March, 2013.

BARNWELL INDUSTRIES, INC.

By: /s/ Russell M. Gifford

Title: Executive Vice President & Chief Financial Officer

We have the authority to bind the Guarantor.

	Royal Bank of Canada 3900 Bankers Hall West 888 – 3rd Street S.W. Calgary, Alberta T2P 5C5 Tel: (403) 292-2093 Fax: (403) 292-3234
	Debra Giles Corporate Banking

Private and Confidential

February 8, 2012

Barnwell of Canada, Limited
c/o Barnwell Industries, Inc.2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    R.M. Gifford, Executive Vice President and Chief Financial Officer

Dear Sirs:

Re: Amendment to Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008, March 25, 2009, April 9, 2010 and March 31, 2011 (collectively, the “Letter Agreement”)

We refer to the Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008, March 25, 2009, April 9, 2010 and March 31, 2011 (collectively, the “Letter Agreement”) between Barnwell of Canada, Limited, as the Borrower, and Royal Bank of Canada, (the “Bank”), and in particular to the Interest Rates and Fees section of the Letter Agreement. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them as in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 1.50% per annum
RBUSBR Loans:	RBUSBR plus 1.50% per annum
BAs:	Acceptance fee of 2.50% per annum
Libor Loans:	Libor plus 2.50% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each
LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 50 Basis Points; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “68.78 bps” and replacing same with “62.50 bps”.

(b) as of the date of this agreement the Term Date is April 30, 2013.

The obligation of the Bank to give effect to the provisions of this Sixth Amending Agreement is subject to and conditional upon satisfaction of the following:

(a) the Bank has received payment of an extension fee of $20,000; and

(b) the Bank has received a duly executed copy of this Sixth Amending Agreement.

This Sixth Amending Agreement is effective as of April 30, 2012.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Sixth Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before April 13, 2012.

Yours truly,

/s/ Debra Giles

Debra Giles

Authorized Signatory

We acknowledge and accept the foregoing terms and conditions as of February 22, 2012.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions, as Guarantor, as of February 22, 2012.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

	Royal Bank of Canada Corporate Banking Suite 3900, 888 – 3rd Street S.W. Calgary, Alberta T2P 5C5 Tel: (403) 292-2093 Fax: (403) 292-3234
	Debra Giles Corporate Banking

March 31, 2011

Private and Confidential

Barnwell of Canada, Limited c/o Barnwell Industries, Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    R.M. Gifford

Executive Vice President and Chief Financial Officer

Dear Sirs:

Re: Amendment to Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008, March 25, 2009 and April 9, 2010 (collectively, the “Letter Agreement”)

We refer to the Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008, March 25, 2009 and April 9, 2010 (collectively, the “Letter Agreement”) between Barnwell of Canada, Limited, as the Borrower, and Royal Bank of Canada, (the “Bank”), and in particular to the Interest Rates and Fees section of the Letter Agreement. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them as in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 1.75% per annum
RBUSBR Loans:	RBUSBR plus 1.75% per annum
BAs:	Acceptance fee of 2.75% per annum
Libor Loans:	Libor plus 2.75% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 50 Basis Points; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “81.25 bps” and replacing same with “68.75 bps”.

(b) as of the date of this agreement the Term Date is April 27, 2012.

The obligation of the Bank to give effect to the provisions of this Fifth Amending Agreement is subject to and conditional upon satisfaction of the following:

(a) the Bank has received payment of an extension fee of $30,000; and

(b) the Bank has received a duly executed copy of this Fifth Amending Agreement.

This Fifth Amending Agreement is effective as of April 28, 2011.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Fifth Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before April 25, 2011.

Yours truly,

/s/ Debra Giles

Debra Giles

Authorized Signatory

We acknowledge and accept the foregoing terms and conditions as of April 6, 2011.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions, as Guarantor, as of April 6, 2011.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

Royal Bank of Canada Corporate Banking Suite 1100, Bankers Hall West 888 – 3rd Street S.W. Calgary, AB T2P 5C5

April 9, 2010

Private and Confidential

Barnwell of Canada, Limitedc/o Barnwell Industries, Inc.2900, 1100 Alakea StreetHonolulu, HawaiiUSA 96813

Attention:    R.M. Gifford, Executive Vice President and Chief Financial Officer

Dear Sirs:

Re: Amendment to Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008 and March 25, 2009 (collectively, the “Letter Agreement”)

We refer to the Letter Agreement dated May 11, 2006, as amended on May 9, 2007, April 11, 2008 and March 25, 2009 (collectively, the “Letter Agreement”) between Barnwell of Canada, Limited, as the Borrower, and Royal Bank of Canada, (the “Bank”), and in particular to the Interest Rates and Fees section of the Letter Agreement. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 2.25% per annum
RBUSBR Loans:	RBUSBR plus 2.25% per annum
BAs:	Acceptance fee of 3.25% per annum
Libor Loans:	Libor plus 3.25% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 50 Basis Points.”; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “100 bps” and replacing same with “81.25 bps”.

(b) as of the date of this agreement the Term Date is April 28, 2011.

The obligation of the Bank to give effect to the provisions of this Fourth Amending Agreement is subject to and conditional upon satisfaction of the following:

(a) the Bank has received payment of an extension fee of $50,000; and

(b) the Bank has received a duly executed copy of this Fourth Amending Agreement.

This Fourth Amending Agreement is effective as of April 29, 2010.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Fourth Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before April 26, 2010.

Yours truly,

/s/ Debra Giles

Debra Giles

Authorized Signatory

We acknowledge and accept the foregoing terms and conditions as of April 12, 2010.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions, as Guarantor, as of April 12, 2010.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

	Royal Bank of Canada Suite 1100, 888 – 3rd Street S.W. Calgary, Alberta T2P 5C5 Tel: (403) 292-2093 Fax: (403) 292-3234
	Debra A. Giles Corporate Banking

March 25, 2009

Private and Confidential

Barnwell of Canada, Limited c/o Barnwell Industries, Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    R.M. Gifford, Vice President and Chief Financial Officer

Dear Sirs:

Re: Amendment to Letter Agreement dated May 11, 2006, as amended on May 9, 2007 and April 11, 2008 (collectively, the “Letter Agreement”)

We refer to the Letter Agreement dated May 11, 2006, as amended on May 9, 2007 and April 11, 2008 (collectively, the “Letter Agreement”) between Barnwell of Canada, Limited, as the Borrower, and Royal Bank of Canada, (the “Bank”), and in particular to the Interest Rates and Fees section of the Letter Agreement. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 2.50% per annum
RBUSBR Loans:	RBUSBR plus 2.50% per annum
BAs:	Acceptance fee of 3.50% per annum
Libor Loans:	Libor plus 3.50% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 50 Basis Points”; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “35 bps” and replacing same with “100 bps”.

(b) as of the date of this agreement the Term Date is April 29, 2010.

The obligation of the Bank to give effect to the provisions of this Third Amending Agreement is subject to and conditional upon satisfaction of the following:

(a) the Bank has received payment of an extension fee of $70,000; and

(b) the Bank has received a duly executed copy of this Third Amending Agreement.

This Third Amending Agreement is effective as of April 30, 2009.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Third Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before April 9, 2009.

Yours truly,

/s/ Debra Giles

Debra Giles

Authorized Signatory

We acknowledge and accept the foregoing terms and conditions as of April 1, 2009.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions, as Guarantor, as of April 1, 2009.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

	Suite 1100, Bankers Hall West 888 – 3rd Street S.W. Calgary, Alberta T2P 5C5 Tel: (403) 292-2093 Fax: (403) 292-3234
	Debra A. Giles Corporate Banking

April 11, 2008

Private and Confidential

Barnwell of Canada, Limitedc/o Barnwell Industries, Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    R.M. Gifford, Vice President and Chief Financial Officer

Dear Sirs:

Re: Amendment to Letter Agreement dated May 11, 2006, as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Letter Agreement”)

We refer to the Letter Agreement dated May 11, 2006, as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Letter Agreement”) between Barnwell of Canada, Limited, as the Borrower, and Royal Bank of Canada, (the “Bank”), and in particular to the Interest Rates and Fees, and Extension of Credit Facility sections of the Letter Agreement. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 0.75% per annum
RBUSBR Loans:	RBUSBR plus 0.75% per annum
BAs:	Acceptance fee of 2.00% per annum
Libor Loans:	Libor plus 2.00% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 25 Basis Points”; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “25 bps” and replacing same with “35 bps”.

(b) the section of the Letter Agreement entitled “EXTENSION OF CREDIT FACILITY” is amended by deleting the section and replacing same with the following:

“The Borrower may request an extension of the Term Date by sending the Bank a written request by no earlier than 90 and no later than 60 days prior to the then current Term Date and the Bank may, in its sole discretion, agree to extend Term Date for a further period of 364 days. The Bank shall advise the Borrower by written notice of its decision regarding the extension of the Term Date by no later than 10 Business Days prior to the then current Term Date.”

(c) as of the date of this agreement the Term Date is April 30, 2009.

This Second Amending Agreement is effective as of April 30, 2008.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Second Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before April 18, 2008.

Yours truly,

/s/ Debra Giles

Debra Giles

Authorized Signatory

We acknowledge and accept the foregoing terms and conditions as of April 18, 2008.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing terms and conditions, as Guarantor, as of April 18, 2008.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

Royal Bank of Canada Energy Banking Centre 11th Floor, 335 - 8th Avenue S.W. Calgary, Alberta T2P 1C9 Tel: (403) 292-3210 Fax: (403) 292-3436 email: Christopher.rice@rbc.com

May 9, 2007

Private and Confidential

Barnwell of Canada, Limited
c/o Barnwell Industries, Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    R.M. Gifford, Vice President and Chief Financial Officer

Dear Sirs:

Re:    Amendment to Letter Agreement dated May 11, 2006

We refer to the Letter Agreement dated May 11, 2006 between Barnwell of Canada, Limited, as the borrower, and Royal Bank of Canada, (the “Bank”) (the “Letter Agreement”), and in particular to the Interest Rates and Fees, Security, Representations and Warranties, Reporting Covenants and General Covenants sections of the Letter Agreement as well as to Schedule “A” thereto. Terms and expressions defined in the Letter Agreement, which are used and not otherwise defined herein, shall have the same meanings ascribed to them in the Letter Agreement.

This letter will confirm that:

(a) the section of the Letter Agreement entitled “INTEREST RATES AND FEES” is amended by:

(i) deleting the subsection thereof entitled “During the Revolving Period” and replacing same with the following:

“During the Revolving Period

RBP Loans:	RBP plus 0.25% per annum
RBUSBR Loans:	RBUSBR plus 0.25% per annum
BAs:	Acceptance fee of 1.50% per annum
Libor Loans:	Libor plus 1.50% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 25 Basis Points.”; and

(ii) deleting from the subsection thereof entitled “Standby Fee” the reference to “50 bps” and replacing same with “25 bps”.

(b) the section of the Letter Agreement entitled “SECURITY” is amended by deleting section (a) thereof and replacing same with the following:

(i) “(a)    general security agreement, including a floating charge on land,     granted by the Borrower to the Bank;”; and

(ii) by deleting sections (d), (e) and (f) thereof;

(c) the section of the Letter Agreement entitled “REPRESENTATIONS AND WARRANTIES” is amended by adding to the end thereto the following:

“(o) all annual audited consolidated financial statements for the Guarantor and all quarterly unaudited financial statements of the Guarantor and for the Borrower provided to the Bank pursuant to this agreement shall be prepared in accordance with GAAP.”

(d) the section of the Letter Agreement entitled “REPORTING COVENANTS” is amended by adding to the end of section (a) thereof the following:

“and quarterly unaudited consolidated financial statements for the Borrower within 60 days of each of the first three fiscal quarter ends and within 120 days of the fourth fiscal quarter end;”

(e) the section of the Letter Agreement entitled “GENERAL COVENANTS” is amended by:

(i) deleting section (c) thereof and replacing same with the following:

“(c) not to, without the prior written consent of the Bank, which consent shall not be unreasonably withheld, cause or permit there to occur a Change of Control;” and

(ii) adding to the end thereof the following:

“(o) not to, without the prior written consent of the Bank, which consent shall not be unreasonably withheld, make any change which would materially alter the business the Borrower as it exists on the date hereof, being the business of the exploration for and the acquisition, development and production of petroleum, natural gas and related hydrocarbons in Western Canada.”

(f) Schedule “A” to the Letter Agreement is amended by adding thereto in alphabetical order the following:

(i) “Change in Control” means any change in the holding, direct or indirect, of shares of the Borrower or the Guarantor, the result of which is that another Person or group of Persons acting in concert are in a position to exercise effective control of the Borrower or the Guarantor, whether such change in the holding of such shares occurs by way of takeover bid, reorganization, recapitalization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise;”

(ii) deleting the definition of “Borrowing Base” and by replacing same with the following:

“Borrowing Base” means the amount determined by the Bank from time to time pursuant to this agreement not exceeding at any time the lesser of:

(a) the amount determined by the Bank in its sole discretion in accordance with its then usual production loan parameters, which constitutes the Bank’s estimate of the net present value of revenues (adjusted to take into account coverage ratios customarily applied by the Bank) expected to be derived by the Borrower and the Guarantor in the future over the full economic life of, and from, the Designated Oil and Gas Properties after deducting therefrom such capital expenditures, operating expenses and other expenses and such charges, royalties, burdens or encumbrances on or in respect of any of the Designated Oil and Gas Properties or deductible in arriving at revenues obtained by the Borrower and the Guarantor therefrom, and

such abandonment and reclamation costs in respect thereof, as the Bank determines. In making the determinations and redeterminations of this amount from time to time, the Bank will utilize its estimate of economic factors, quantity and recoverability of reserves, demand for and deliverability of oil and gas substances, pricing forecasts, burdens, foreign exchange rates, escalation or de-escalation of commodity prices and expenses over the economic life of the relevant reserves and other assumptions and factors as the Bank considers affects such determination or redetermination; and

(b) the maximum amount of Borrowings, which could be repaid in accordance with the provisions of this agreement from the estimated future net cash flow of the Designated Oil and Gas Properties (after taking into account any hedging contracts and any royalties or other burdens applicable to such Designated Oil and Gas Properties) after deducting therefrom, without duplication, the Bank’s reasonable estimate of interest payable in respect of such Borrowings and other amounts (excluding Borrowings) payable under this agreement and direct operating and capital costs, general and administrative expenses, tax liabilities and such other expenses as the Bank may determine could reasonably be anticipated to be payable by the holder of such Designated Oil and Gas Properties all as determined by the Bank and using the Bank’s then current projections of oil and gas prices, interest rates, exchange rates and other assumptions affecting such estimated future net cashflow and expenses in accordance with the Bank’s customary practices for oil and gas loans;” and

(iii) deleting the definition of “Designated Oil and Gas Properties” and replacing same with the following:

“Designated Oil and Gas Properties” means oil and gas properties in Western Canada in which either the Borrower or the Guarantor have an interest;” and

(g) as of the date of this agreement the Term Date is April 30, 2008.

The obligation of the Bank to give effect to the provisions of this Amending Agreement is subject to and conditional upon satisfaction of the following:

(a) there exists no Event of Default;

(b) the representations and warranties contained in the Letter Agreement are true and correct as of the date hereof and the Borrower has complied with all covenants contained in the Letter Agreement as of the date hereof; and

(c) the Bank has received the following documents, in form and substance satisfactory to the Bank:

(i) duly executed copy of this Amending Agreement;

(ii) a duly executed general security agreement, including a floating charge on land, executed by the Borrower;

(iii) a certificate from an officer of the Borrower in the form attached as Schedule “A” hereto certifying that all the representations and warranties contained in the Letter Agreement are true and correct as of the date hereof and that the Borrower has complied with all covenants contained in the Letter Agreement as of the date hereof;

(iv) a Consent of Guarantor in the form attached as Schedule “B” hereto duly executed by the Guarantor; and

(v) such other documents, instruments, registrations and assurances as the Bank may reasonably request.

This Amending Agreement is effective as of May 9, 2007.

All other terms and conditions outlined in the Letter Agreement remain unchanged and in full force and effect.

Please confirm your acceptance of this Amending Agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned on or before May 9, 2007.

Yours truly,

/s/ Christopher Rice

Christopher Rice

Authorized Signatory

We acknowledge and accept the foregoing termsand conditions as of May 9, 2007.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

We acknowledge and accept the foregoing termsand conditions, as Guarantor, as of May 9, 2007.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and Chief Financial Officer

I/We have authority to bind the corporation.

SCHEDULE “A”

CERTIFICATE

TO:    ROYAL BANK OF CANADA (the “Bank”)

The undersigned, Russell M. Gifford, being the Vice President and Chief Financial Officer of Barnwell of Canada, Limited (“Borrower”), does hereby certify, for and on behalf of the Borrower and not in his personal capacity and without any personal liability, as follows:

I am personally familiar, in my capacity as Vice President and Chief Financial Officer of the Borrower, with the matters hereinafter mentioned.

All of the representations and warranties of the Borrower contained in the Letter Agreement dated as of May 11, 2006 between the Borrower and the Bank, as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Loan Agreement”) are true and correct as of the date hereof and the Borrower has complied with all covenants thereunder.

This certificate is made pursuant to the Amending Agreement made as of May 9, 2007 between the Borrower and the Bank.

All capitalized terms used but not otherwise defined herein shall have the same meanings ascribed thereto in the Loan Agreement.

DATED at Calgary, Alberta, as of the 9th day of May, 2007.

By: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

* * * * * * * * * * * * * * * *

The Borrower acknowledges that this Certificate is binding upon it and that if there is any false or misleading information provided herein or pursuant hereto a breach shall be deemed to occur under all or part of the Loan Agreement.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

Per:

Name:

Title:

SCHEDULE “B”

CONSENT OF GUARANTOR

TO:	Royal Bank of Canada
RE:	Letter Agreement dated as of May 11, 2006 between Barnwell of Canada, Limited and Royal Bank of Canada (the “Bank”), as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Loan Agreement”)

In consideration of the sum of One ($1.00) Dollar now paid by the Bank to the undersigned and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by the undersigned), the undersigned hereby consents to and agrees with the Borrower and the Bank entering into the Amending Agreement dated May 9, 2007 (the “Amending Agreement”) and agrees with the Bank that:

i. all capitalized terms used but not otherwise defined herein shall have the same meanings ascribed thereto in the Loan Agreement;

the Guarantee and Postponement of Claim executed by the undersigned in favour of the Bank dated September 14, 1989 (the “Guarantee”) shall include, without restricting any of the provisions of the Guarantee, a guarantee of all obligations of the Borrower under the Loan Agreement (and as hereafter supplemented, amended or restated from time to time); and

all security heretofore or hereafter granted by the undersigned in favour of the Bank as security for the undersigned’s obligations to the Bank shall, without restricting any of the provisions of such security, constitute collateral security for the obligations of the undersigned pursuant to the Guarantee;

and the Guarantee shall continue in full force and effect in accordance with its terms and is hereby ratified and confirmed in every respect.

DATED at the City of Calgary, in the Province of Alberta as of the 9th day of May, 2007.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and
Chief Financial Officer

GENERAL SECURITY AGREEMENT

This GENERAL SECURITY AGREEMENT dated as of May 9, 2007, made by Barnwell of Canada, Limited (the “Debtor”), to and in favour of the Royal Bank of Canada (“RBC”).

RECITALS:

A. The Debtor and RBC are parties to a credit agreement dated May 11, 2006, as amended by an amending agreement dated May 9, 2007 (such credit agreement, as amended, and as it may be further amended, supplemented or otherwise modified or restated from time to time, collectively, the “Credit Agreement”).

B. To secure, the payment and performance of all present and future, direct or indirect, indebtedness, liabilities and obligations of any kind which the Debtor has from time to time incurred or may incur or be under to RBC, under the terms of the Credit Agreement, or any other Loan Documents to which it is a party (collectively, the “Secured Indebtedness”), the Debtor has agreed to grant to RBC a security interest over the Collateral in accordance with the terms of this Agreement.

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which are conclusively acknowledged by the Debtor, the Debtor agrees with and in favour of RBC as follows:

1. Definitions. Capitalized words and phrases used and not otherwise defined in this Agreement will have the meanings set out in the Credit Agreement. “Lien” means any mortgage, lien, pledge, charge (whether fixed or floating), security interest or other encumbrance of any kind, contingent or absolute. In addition the terms “chattel paper”, “consumer goods”, “documents of title”, “goods”, “instruments”, “intangibles”, “money”, “personal property”, “proceeds” and “securities” have the meanings attributed thereto in the Personal Property Security Act (Alberta) (including all amendments thereto or restatements thereof and regulations thereunder; the “PPSA”).

2. Grant of Security. As general and continuing collateral security for the due payment and performance of the Secured Indebtedness, the Debtor grants, mortgages, charges and assigns to RBC:

(a) a security interest, as and by way of a first fixed and specific security interest (the “Security Interest”) in the Debtor’s right, title and interest in and to all of its present and after-acquired personal property, including all proceeds thereof in the form of goods, chattel paper, securities, documents of title, instruments, money or intangibles; and

(b) a mortgage and charge as and by way of a floating charge, in all of the Debtor’s present and after acquired interest in property, assets and undertaking not secured in (a) above, including all real, immoveable and leaseholds property and all easements, rights-of-way, privileges, benefits, licences, improvements and rights whether connected therewith or appurtenant thereto or separately owned or held, including without limitation, all structures, plant and other fixtures now owned or hereafter owned or acquired by or on behalf of the Debtor; and a security interest in all proceeds and renewals thereof, accretions thereto and substitution therefor, all of the foregoing being hereinafter collectively referred to as the “Collateral”.

3. Contractual Rights. The Security Interest does not and will not extend to, and the Collateral will not include, any agreement, right, franchise, license or permit (the “Contractual Rights”) to which the Debtor is a party or of which the Debtor has the benefit, to the extent that the creation of the Security Interest herein would constitute a breach of the terms of or permit any Person to terminate the Contractual Rights, but the Debtor will hold its interest therein in trust for RBC, and will assign such Contractual Rights to RBC forthwith upon obtaining the consent of the other party or parties thereto.

4. Attachment. The Debtor confirms that value has been given, that the Debtor has rights in the Collateral, and that the Debtor and RBC have not agreed to postpone the time for attachment of the Security Interest to any of the Collateral. In respect of Collateral which is acquired after the date of execution hereof, the time for attachment will be the time when the Debtor acquires such Collateral.

5. Remedies. Subject to Section 6 hereof and the terms of the Loan Documents, upon the occurrence and during the continuance of any Event of Default, RBC will be entitled to exercise any of the remedies specified below:

(a) Receiver. RBC may appoint by instrument in writing one or more receivers, managers or receiver/manager for the Collateral or the business and undertaking of the Debtor pertaining to the Collateral (the “Receiver”). Any such Receiver will have, in addition to any other rights, remedies and powers which a Receiver may have at law, in equity or by statute, the rights and powers set out in clauses (b) through (d) in this Section 5. In exercising such rights and powers, any Receiver will act as and for all purposes will be deemed to be the agent of the Debtor and RBC will not be responsible for any act or default of any Receiver. RBC may remove any Receiver and appoint another from time to time. No Receiver appointed by RBC need be appointed by, nor need its appointment to be ratified by, or its actions in any way supervised by, a court.

(b) Power of Sale. Any Receiver may sell, consign, lease or otherwise dispose of any Collateral by public auction, private tender, private contract, lease or deferred payment with or without notice, advertising or any other formality, all of which are hereby waived by the Debtor. Any Receiver may, at its discretion establish the terms of such disposition, including terms and conditions as to credit, upset, reserve bid or price. All payments made pursuant to such dispositions will be credited against the Secured Indebtedness only as they are actually received. Any Receiver may buy in, rescind or vary any contract for the disposition of any Collateral and may dispose of any Collateral. Any such disposition may take place whether or not the Receiver has taken possession of the Collateral.

(c) Pay Liens and Borrow Money. Any Receiver may pay any liability secured by any actual or threatened Lien against any Collateral. Any Receiver may borrow money for the maintenance, preservation or protection of any Collateral or for carrying on any of the business or undertaking of the Debtor pertaining to the Collateral and may grant Liens in any Collateral (in priority to the Security Interest or otherwise) as security for the money so borrowed. The Debtor will forthwith upon demand reimburse the Receiver for all such payments and borrowings and such payments and borrowings will be secured hereby and will be deemed to form part of the Secured Indebtedness.

(d) Dealing with Collateral. Any Receiver may seize, collect, realize, dispose of, enforce, release to third parties or otherwise deal with any Collateral in such manner, upon such terms and conditions and at such time as it deems advisable, including:

(i) to ask, demand, collect, sue for, recover, compromise, receive and give acquittance and receipts for moneys due and to become due under or in connection with the Collateral;

(ii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper in connection with Section 5(d)(i);

(iii) to file any claims or take any action or institute any proceedings which RBC may deem to be necessary or desirable for the collection of the Collateral or to enforce compliance with the terms and conditions of any contract or any account; and

(iv) to perform the affirmative obligations of the Debtor hereunder and under the Loan Documents to which it is a party.

(e) Carry on Business. RBC or any Receiver may carry on, or concur in the carrying on of, any or all of the business or undertaking of the Debtor and upon written notice to the Debtor enter on, occupy and use (without charge by the Debtor) any of the premises, buildings, plant and undertaking of, or occupied or used by, the Debtor.

(f) Right to Have Court Appoint a Receiver. RBC may, at any time, apply to a court of competent jurisdiction for the appointment of a Receiver, or other official, who may have powers the same as, greater or lesser than, or otherwise different from, those capable of being granted to a Receiver appointed by RBC pursuant to this Agreement.

(g) May Exercise Rights of a Receiver. In lieu of, or in addition to, exercising its rights, remedies and powers under clauses (a), (f) and (h) of this Section 5, RBC has, and may exercise, any of the rights and powers which are capable of being granted to a Receiver appointed by RBC pursuant to this Agreement.

(h) Retention of Collateral. RBC may elect to retain any Collateral in satisfaction of the Secured Indebtedness. RBC may designate any part of the Secured Indebtedness to be satisfied by the retention of particular Collateral which RBC considers to have a net realizable value approximating the amount of the designated part of the Secured Indebtedness, in which case only the designated part of the Secured Indebtedness will be deemed to be satisfied by the retention of the particular Collateral.

(i) Limitation of Liability. RBC will not be liable or accountable for any failure to take possession of, seize, collect, realize, dispose of, enforce or otherwise deal with any Collateral and none of them will be bound to institute proceedings for any such purposes or for the purpose of reserving any rights, remedies and powers of RBC, the Debtor or any other Person in respect of any Collateral. If any Receiver or RBC takes possession of any Collateral, RBC will not have any liability as a mortgagee in possession or be accountable for anything except actual receipts.

(j) Extensions of Time. Following the occurrence and during the continuance of any Event of Default, RBC may grant renewals, extensions of time and other indulgences, accept compositions, grant releases and discharges, and otherwise deal or fail to deal with the Debtor, debtors of the Debtor, guarantors, sureties and others and with any Collateral as RBC may see fit, all without prejudice to the liability of the Debtor to RBC or RBC’s rights, remedies and powers under this Agreement or the Loan Documents.

(k) Validity of Sale. No Person dealing with RBC or any Receiver, or with any officer, employee, agent or solicitor of RBC or any Receiver will be concerned to inquire

whether the Security Interest has become enforceable, whether the right, remedy or power of RBC or the Receiver has become exercisable, whether any Secured Indebtedness remaining outstanding or otherwise as to the proprietary or regularity of any dealing by RBC or the Receiver with any Collateral or to see to the application of any money paid to RBC or the Receiver, and in the absence of fraud on the part of such Person such dealings will be deemed, as regards such Person, to be within the rights, remedies and powers hereby conferred and to be valid and effective accordingly.

(l) Effect of Appointment of Receiver. As soon as RBC takes possession of any Collateral or appoints a Receiver, all powers, functions, rights and privileges of the Debtor including any such powers, functions, rights and privileges which have been delegated to directors, officers of the Debtor or committees with respect to such Collateral will cease, unless specifically continued by the written consent of RBC or the Receiver.

(m) Time for Payment. If RBC demands payment of any Secured Indebtedness that is payable on demand or if any Secured Indebtedness is otherwise due by maturity or acceleration, it will be deemed reasonable for RBC to exercise its remedies immediately if such payment is not made, and any days of grace or any time for payment that might otherwise be required to be afforded to the Debtor at law or in equity is hereby irrevocably waived.

(n) No Implied Waiver. The rights of the Debtor and RBC (whether arising under this Agreement, any other Loan Document, any other agreement or at law or in equity) will not be capable of being waived or varied otherwise than by an express waiver or variation in writing, and in particular any failure to exercise or any delay in exercising any of such rights will not operate as a waiver or variation of that or any other such right; any defective or partial exercise of any of such rights will not preclude any other or further exercise of that or any other such right, and no act or course of conduct or negotiation on the part of RBC or the Debtor or on their behalf will in any way preclude RBC or the Debtor from exercising any such right or constitute a suspension or any variation of any such right.

(o) Rights Cumulative. The rights, remedies and powers conferred by this Section 5 are in addition to, and not in substitution for, any other rights, remedies or powers that RBC or the Debtor may have under any Loan Documents, at law, in equity or by or under the PPSA or any other statute or agreement. RBC may proceed by way of any action, suit or other proceeding at law or in equity and no right, remedy or

power of RBC will be exclusive of or dependent on any other. RBC may exercise any of its rights, remedies or powers at any time.

6. Application of Amounts Received. The Debtor and RBC agree that the proceeds arising from any enforcement of this Agreement (whether by RBC or any receiver-manager) or any other security documentation that may, from time to time, be granted to RBC pursuant to the Loan Documents, will be applied in the following order:

(a) first, to the payment in full of all reasonable fees of RBC and all reasonable out-of-pocket costs, fees and expenses (including legal fees on a solicitor and his own client full indemnity basis) incurred by RBC and any Receiver or other enforcement agent appointed by RBC or a court of competent jurisdiction, as the case may be, in connection with the collection or enforcement of the Secured Indebtedness owed to RBC, as applicable, the enforcement of the Security Interest or the preservation of the Collateral;

(b) second, to the payment in full of the Secured Indebtedness; and

(c) third, the balance, if any, will be paid, subject to Applicable Law, to the Debtor.

7. Limitation on Duties Regarding Preservation of Collateral. RBC’s sole duty with respect to the custody, safekeeping and physical preservation of Collateral in its possession or under its control will be to use reasonable care in the custody and preservation of such Collateral. The Debtor agrees that RBC will be deemed to have used reasonable care in the custody and preservation of Collateral if RBC deals with such Collateral in the same manner as RBC deals with similar property for its own account and, to the extent permitted by Applicable Law, RBC need not take any steps to preserve rights against any other Person (including prior parties). Neither RBC nor any of its directors, officers, employees or agents will be liable for failure to demand, collect or realize upon the Collateral or for any delay in doing so or will be under any obligation to sell or otherwise dispose of any Collateral upon the request of the Debtor or otherwise.

8. Chief Executive Office. The Debtor represents and warrants to RBC that (i) the address of the Debtor’s chief executive office is 900, 639 - 5th Avenue S.W., Calgary, Alberta, T2P OM9 and the Debtor carries on business only in the Provinces of British Columbia, Alberta and Saskatchewan; and (ii) that the only name used by the Debtor in such jurisdiction is “Barnwell of Canada, Limited”.

9. Waiver. The Debtor hereby covenants and agrees with RBC that:

(a) The Land Contracts (Actions) Act (Saskatchewan) will have no application to any action as defined therein, with respect to the Loan Documents; and

(b) The Limitation of Civil Rights Act (Saskatchewan) will have no application to

(i) the Loan Documents;

(ii) any Lien for the payment of money made, given created or contemplated by the Loan Documents;

(iii) any agreement or instrument renewing or extending or collateral to the Loan Documents or renewing or extending or collateral to any Lien referred to or mentioned in subparagraph (b)(ii) of this Section 9; or

(iv) the rights, powers or remedies of the parties under the Loan Documents or Lien, agreement or instrument referred to or mentioned in subparagraphs (b)(ii) or (b)(iii) of this Section 9.

10. Covenants. The Debtor covenants and agrees with RBC that:

(a) Further Documentation; Pledge of Instruments. At any time and from time to time, upon the written request of RBC, and at the sole expense of the Debtor, the Debtor will promptly and duly execute and deliver such further instruments and documents and take such further action as RBC may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing or execution of any financing or financing change statements under any Applicable Law with respect to the Security Interest. The Debtor also hereby authorizes RBC to file any such financing or financing change statement without the signature of the Debtor to the extent permitted by Applicable Law. Without limiting the generality of the foregoing, the Debtor acknowledges that this Agreement has been prepared based on Applicable Law and the Debtor agrees that RBC will have the right to require that this Agreement be amended or supplemented: (i) to reflect any changes in Applicable Law, whether arising as a result of statutory amendments, court decisions or otherwise; (ii) to facilitate the creation and registration of appropriate security in all appropriate jurisdictions; or (iii) if the Debtor amalgamates with any other Person or enters into any reorganization, in each case in order to confer upon RBC the Liens intended to be created hereby.

(b) Payment of Expenses; Indemnification. The Debtor agrees to pay, and to indemnify and save RBC harmless from, any and all reasonable liabilities, costs and

expenses (including reasonable legal fees and expenses on a solicitor and his own client full indemnity basis): (i) incurred by RBC in the preparation, registration, administration or enforcement of this Agreement; (ii) with respect to, or resulting from, any delay by the Debtor in paying any and all excise, sales, goods and services or other taxes which may be payable or determined to be payable with respect to any of the Collateral; (iii) with respect to, or resulting from, any delay by the Debtor in complying with any requirement of Applicable Law; or (iv) incurred by RBC in connection with any of the transactions contemplated by this Agreement; except, in any case, to the extent such liabilities, costs and expenses result from the gross negligence or wilful misconduct of RBC. The amount of all such liabilities, costs and expenses will be deemed to form part of the Secured Indebtedness, will be payable on demand made by RBC and the payment of all such liabilities, costs and expenses will be secured hereby.

(c) Limitation on Liens on Collateral. The Debtor will not create, incur or permit to exist, will defend the Collateral against, and will take such other action as is necessary to remove, any Lien or claim on or to the Collateral, other than the Security Interest, the floating charge granted under this Agreement, Permitted Encumbrances and Liens permitted in writing by RBC and the Debtor will defend the right, title and interest of RBC in and to any of the Collateral against the claims and demands of all Persons.

(d) Limitations on Dispositions of Collateral. Subject to the terms of the Loan Documents to which the Debtor is a party, the Debtor will not sell, transfer, lease or otherwise dispose of any of the Collateral, or attempt, offer or contract to do so except in the ordinary course of the Debtor’s business.

(e) Further Identification of Collateral. The Debtor will furnish to RBC from time to time such statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as RBC may reasonably request, all to the extent necessary to permit the Collateral to be sufficiently described.

(f) Notices. The Debtor will advise RBC promptly, in reasonable detail, of: (i) any change in the location of any place of business or the chief executive office of the Debtor; or (ii) any change in the name of the Debtor.

11. RBC’s Appointment as Attorney-in-Fact. The Debtor hereby irrevocably constitutes and appoints RBC and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead

of the Debtor and in the name of the Debtor or in its own name, from time to time in RBC’s discretion, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement and which the Debtor being required to take or execute has failed to take or execute. The Debtor hereby ratifies all that said attorneys will lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and will be irrevocable until the Secured Indebtedness has been unconditionally and irrevocably paid and performed in full. The Debtor also authorizes RBC, at any time and from time to time, to execute any endorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral in connection with the sale provided for in Section 5(b) hereof.

12. Severability. If any portion of this Agreement or the application thereof to any circumstances will be held invalid or unenforceable by a court of competent jurisdiction from which no further appeal has or is taken, to an extent that does not affect in a fundamental way the operation of this Agreement, the remainder of the provision in question, or its application to any circumstance other than that to which it has been held invalid or unenforceable, and the remainder of this Agreement will not be affected thereby and will be valid and enforceable to the fullest extent permitted by Applicable Law.

13. Interpretation. The paragraph headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof. When used in this Agreement, the word “including” means “including without limitation”. Any reference in this Agreement to any statute will include all regulations thereunder from time to time, and will include such statute as the same may be amended, supplemented or replaced from time to time.

14. Enurement and Assignment. This Agreement will be binding upon the Debtor and its successors and will enure to the benefit of RBC and its successors and assigns. The Debtor will not assign this Agreement without RBC’s prior written consent.

15. Non-Exclusivity of Remedies. This Agreement and the Security Interest are in addition to and not in substitution for any other security now or hereafter held by RBC in respect of the Debtor, the Secured Indebtedness or the Collateral. No remedy for the enforcement of the rights of RBC hereunder will be exclusive of or dependent on any other such remedy but any one or more of such remedies may from time to time be exercised independently or in combination.

16. Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Province of Alberta and the laws of Canada applicable therein, without giving

effect to the conflict of law principles thereof. Without prejudice to the ability of RBC to enforce this Agreement in any other proper jurisdiction, the Debtor hereby irrevocably submits and attorns to the jurisdiction of the courts of the Province of Alberta, or any appellate court thereof, for the purposes of this Agreement.

17. Notices.

(a) Any notice as between the Debtor and RBC which may or is required to be given pursuant to or in connection with this Agreement will be in writing and will be sufficient if given or made at the address set forth below:

(i) in the case of RBC to:

Royal Bank of CanadaEnergy Banking Centre11th Floor, 335 - 8th Avenue S.W.Calgary, Alberta T2P 1C9

Attention:    ManagerFacsimile:    (403) 292-3436

(ii) in the case of the Debtor, to:

Barnwell of Canada, Limited c/o Barnwell Industries Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA 96813

Attention:    Vice President and Chief Financial OfficerFacsimile:    (808) 531-7181

(b) The Debtor and RBC each covenant to accept service of judicial proceedings arising under this Agreement at its respective address for notice hereunder.

(c) Any notice or other communication given or made in accordance with this Section 17 will be deemed to have been given or made on the same day and to have been received on the day of delivery if delivered as aforesaid or on the day of receipt of same by telecopy or other recorded means of electronic communication, as the case may be, provided such day is a Business Day and that such notice is received prior to 12:00 noon local time and, if such day is not a Business Day or if notice is received after 12:00 noon local time, on the first Business Day thereafter.

(d) Each of the Debtor and RBC may change its address and telecopier number for purposes of this Section 17 by written notice given in the manner provided in this Section 17 to the other party.

18. Inconsistency. To the extent that there is any inconsistency or ambiguity between the provisions of the Loan Documents and this Agreement, then, as between the Debtor and RBC, the provisions of the Loan Documents will govern to the extent necessary to eliminate such inconsistency or ambiguity.

19. Receipt of Copy. The Debtor acknowledges receipt of an executed copy of this Agreement. The Debtor waives the right to receive any amount that it may now or hereafter be entitled to receive (whether by way of damages, fine, penalty, or otherwise) by reason of the failure of RBC to deliver to the Debtor a copy of any financing statement or any statement issued by any registry that confirms registration of a financing statement relating to this Agreement.

20. Time of the Essence. Time will be of the essence of this Agreement.

TO WITNESS this Agreement, the Debtor has caused it to be duly executed on the date first written above.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

CERTIFICATE

TO:    ROYAL BANK OF CANADA (the “Bank”)

The undersigned, Russell M. Gifford, being the Vice President and Chief Financial Officer of Barnwell of Canada, Limited (“Borrower”), does hereby certify, for and on behalf of the Borrower and not in his personal capacity and without any personal liability, as follows:

i. I am personally familiar, in my capacity as Vice President and Chief Financial Officer of the Borrower, with the matters hereinafter mentioned.

All of the representations and warranties of the Borrower contained in the Letter Agreement dated as of May 11, 2006 between the Borrower and the Bank, as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Loan Agreement”) are true and correct as of the date hereof and the Borrower has complied with all covenants thereunder.

This certificate is made pursuant to the Amending Agreement made as of May 9, 2007 between the Borrower and the Bank.

All capitalized terms used but not otherwise defined herein shall have the same meanings ascribed thereto in the Loan Agreement.

DATED at Calgary, Alberta, as of the 9th day of May, 2007.

By: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

* * * * * * * * * * * * * * * *

The Borrower acknowledges that this Certificate is binding upon it and that if there is any false or misleading information provided herein or pursuant hereto a breach shall be deemed to occur under all or part of the Loan Agreement.

BARNWELL OF CANADA, LIMITED

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Vice President and Chief Financial Officer

Per:

Name:

Title:

CONSENT OF GUARANTOR

TO:	Royal Bank of Canada
RE:	Letter Agreement dated as of May 11, 2006 between Barnwell of Canada, Limited and Royal Bank of Canada (the “Bank”), as amended by an Amending Agreement dated as of May 9, 2007 (collectively, the “Loan Agreement”)

In consideration of the sum of One ($1.00) Dollar now paid by the Bank to the undersigned and for other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged by the undersigned), the undersigned hereby consents to and agrees with the Borrower and the Bank entering into the Amending Agreement dated May 9, 2007 (the “Amending Agreement”) and agrees with the Bank that:

i. all capitalized terms used but not otherwise defined herein shall have the same meanings ascribed thereto in the Loan Agreement;

the Guarantee and Postponement of Claim executed by the undersigned in favour of the Bank dated September 14, 1989 (the “Guarantee”) shall include, without restricting any of the provisions of the Guarantee, a guarantee of all obligations of the Borrower under the Loan Agreement (and as hereafter supplemented, amended or restated from time to time); and

all security heretofore or hereafter granted by the undersigned in favour of the Bank as security for the undersigned’s obligations to the Bank shall, without restricting any of the provisions of such security, constitute collateral security for the obligations of the undersigned pursuant to the Guarantee;

and the Guarantee shall continue in full force and effect in accordance with its terms and is hereby ratified and confirmed in every respect.

DATED at the City of Calgary, in the Province of Alberta as of the 9th day of May, 2007.

BARNWELL INDUSTRIES, INC.

Per: /s/ Russell M. Gifford

Name: Russell M. Gifford

Title: Executive Vice President and
Chief Financial Officer

Royal Bank of Canada
Energy Banking Centre
11th Floor, 335 – 8th Avenue S.W.
Calgary, Alberta T2P 1C9
Transit 11904
May 11, 2006	Tel.: (403) 292-3210
	Fax (403) 292-3436
Private and Confidential	email: Christopher.rice@rbc.com

Barnwell of Canada, Limited c/o Barnwell Industries, Inc. 2900, 1100 Alakea Street Honolulu, HawaiiUSA, 96813

Attention:    Mr. R.M. Gifford, Vice President and CFO

Dear Sirs:

We are pleased to offer the credit facility described below (the “Credit Facility”), subject to the following terms and conditions:

AMENDMENT AND RESTATEMENT

Barnwell of Canada, Limited (the “Borrower”), as borrower, and Royal Bank of Canada (the “Bank”), as lender, acknowledge and agree that the provisions of the Existing Credit Agreement are, effective as of the date of acceptance of this agreement by the Borrower (the “Effective Date”), hereby amended, modified and supplemented so as to read as set forth in this agreement and that the provisions of the Existing Credit Agreement, as so amended, modified and supplemented hereby, are restated in this agreement in their entirety.

CONTINUANCE OF OBLIGATIONS, RIGHTS AND REMEDIES

The Existing Credit Agreement, as amended, modified and supplemented hereby, is hereby ratified and confirmed, and shall from and after the Effective Date continue in full force and effect, as herein

amended, modified, supplemented and restated. Without restricting the generality of the preceding sentence, it is agreed that obligations, rights and remedies which as of the Effective Date have arisen under the Existing Credit Agreement and remain outstanding under the Existing Credit Agreement shall, subject only to the effect of the amendments, modifications and supplements to the Existing Credit Agreement effected by this agreement, continue in effect without interruption, removal, impairment, abatement or prejudice, all in accordance with and subject to the provisions herein set forth, and it is agreed in particular (but without limiting the generality of the foregoing), that nothing in this agreement shall constitute a new loan or loans or the effective repayment and readvance of the Borrowings as outstanding on the Effective Date, and that the liability of the Borrower in respect of the Borrowings as outstanding on the Effective Date shall be and be deemed to be continued under and governed by this agreement from and after the Effective Date.

DEFINITIONS AND SCHEDULES

The attached schedules are incorporated into this agreement by reference. Schedule “A” contains definitions of capitalized terms used and not otherwise defined in this agreement. Unless otherwise provided, all dollar amounts are in Canadian currency and accounting terms are to be interpreted in accordance with GAAP.

CREDIT FACILITY

Up to $20,000,000 extendible revolving operating credit facility, by way of:

(a) RBP based loans (“RBP Loans”);

(b) RBUSBR based loans in US currency (“RBUSBR Loans”);

(c) Bankers’ Acceptances (“BAs”);

(d) Libor based loans in US currency (“Libor Loans”); and

(e) Letters of Credit in Canadian Currency or US currency.

Each use of the Credit Facility is a “Borrowing” and all such usages outstanding at any time are “Borrowings”. Schedule “B” contains notice provisions applicable to Borrowings that must be complied with. Schedule “C” contains terms and conditions applicable to Borrowings made otherwise than by way of RBP Loans or RBUSBR Loans which must be complied with.

PURPOSE

To finance general operating requirements.

AVAILABILITY

During the Revolving Period the Borrower may borrow, convert, repay and reborrow up to the amount of this revolving operating Credit Facility, provided the aggregate Borrowings outstanding under this Credit Facility must not exceed the Borrowing Base.

From time to time and at least annually, the Borrowing Base shall be re-calculated by the Bank upon receipt of each engineering report required to be delivered hereunder, and if the Borrower fails to deliver any such report then at any other time at the Bank’s sole discretion. The Bank shall notify the Borrower of each change in the amount of the Borrowing Base. In the event that the Bank re-calculates the Borrowing Base to be an amount that is less than the Borrowings outstanding, the Borrower shall within 60 days of receiving written notice of the new Borrowing Base, either:

(a) provide additional security, in a form acceptable to the Bank; or

(b) repay the difference between the Borrowings outstanding and the new Borrowing Base; or

(c) add Designated Oil and Gas Properties to the Borrowing Base, which together with repayment of the remaining difference between the Borrowings outstanding and the Borrowing Base, ensures Borrowings are not thereafter in excess of the Borrowing Base.

The Borrowing Base as of the date of this agreement is $20,000,000.00.

REPAYMENT

Borrowings under the Credit Facility are expected to revolve.

Borrowings under the Credit Facility shall be repayable on the Maturity Date unless an extension of the Term Date is agreed to between the Borrower and the Bank as provided below. If the Revolving Period is not extended, then any unutilized portion of the Credit Facility shall be cancelled and the amount of the Credit Facility shall be reduced to an amount equal to the aggregate Borrowings outstanding. Such amount of Borrowings under the Credit Facility shall then be repayable by eight consecutive quarterly blended payments of principal and interest, each for 5% of such principal amount, together with interest thereon, commencing on the 90th day after the Term Date and thereafter on a quarterly basis, on the last day of each such quarter and the balance of the Credit Facility shall be repayable in full on the Maturity Date.

PREPAYMENT AND CANCELLATION

Subject to the terms applicable to BAs and LCs, the Borrower may, without penalty or premium, prepay Borrowings under the Credit Facility upon fifteen (15) Business Days prior written notice to the Bank and all Borrowings which are prepaid shall be applied, on a pro rata basis, to the then

outstanding Borrowings under the Credit Facility. Any prepayment as aforesaid, except prepayments during the Revolving Period, or extension thereof shall also cancel a corresponding amount of the Credit Facility.

Upon fifteen (15) Business Days prior written notice to the Bank, the Borrower may, without penalty or premium, cancel any unutilized portion of the Credit Facility.

EXTENSION OF CREDIT FACILITY

The Borrower may request an extension of the Term Date by sending the Bank a written request by no than 90 and no later than 60 days prior to the then current Term Date and the Bank may, in its sole discretion, agree to extend Term Date for a further period of 364 days. The Bank shall advise the Borrower by written notice of its decision regarding the extension of the Term Date by no later than 10 Business Days prior to the then current Term Date.

INTEREST RATES AND FEES

During the Revolving Period

RBP Loans:	REP plus 1% per annum
RBUSBR Loans:	RBUSBR plus 1% per annum
BAs:	Acceptance fee of 2% per annum
Libor Loans:	Libor plus 2% per 360 day period
LCs:	fee to be quoted by the Bank at the time of issue of each LC.

During the Term Period and upon the occurrence of an Event of Default the above rates and fees shall, in all cases, increase by 25 Basis Points.

Revolvement Fee

An administration fee of $100 per month, for revolving RBP Loans and RBUSBR Loans under the Credit Facility is payable monthly in arrears on such date as the Bank may determine.

Standby Fee

The Borrower shall pay a standby fee monthly in arrears on the first day of each month at the rate of 50 bps. This fee will be calculated monthly and will accrue daily on the unutilized and uncancelled portion of the amount of the Credit Facility from and including the date of this agreement.

CALCULATION AND PAYMENT OF INTEREST AND FEES

RBP Loans and RBUSBR Loans

The Borrower shall pay interest on each REP Loan and RBUSBR Loan, monthly in arrears, on the 20^th day of each month or such other day as may be agreed to between the Borrower and the Bank. Such interest will be calculated monthly and will accrue daily on the basis of the actual number of days elapsed and a year of 365 days. Interest on RBUSBR Loans shall be paid in US currency.

LC Fees

The Borrower shall pay an LC fee on the date of any payment made by the Bank pursuant to a drawing under any LC calculated on the amount drawn, based upon the number of days the LC was outstanding and a year of 365 days. If the total amount available under any LC has not been drawn prior to the expiry of such LC, the Borrower shall pay an LC fee calculated on the undrawn portion of such LC on the expiry date thereof, based upon the number of days the LC was outstanding and a year of 365 days.

BAs

The Borrower shall pay an acceptance fee in advance on the date of issue of each BA at the applicable rate provided for in this agreement. Acceptance fees shall be calculated on the face amount of the BA issued and based upon the number of days in the term thereof and a year of 365 days.

Libor Loans

The Borrower shall pay interest on each Libor Loan, on each Libor Interest Date, calculated in arrears. Such interest will accrue daily on the basis of the actual number of days elapsed and a year of 360 days.

Limit on Interest

The Borrower shall not be obligated to pay any interest, fees or costs under or in connection with this agreement in excess of what is permitted by law.

Overdue Payments

Any amount that is not paid when due hereunder shall, unless interest is otherwise payable in respect thereof in accordance with the terms of this agreement or the instrument or contract governing same, bear interest until paid at the rate of RBP plus 1% per annum or, in the case of an amount in US currency, RBUSBR plus 1% per annum.

Equivalent Yearly Rates

The annual rates of interest or fees to which the rates calculated in accordance with this agreement are equivalent, are the rates so calculated multiplied by the actual number of days in the calendar

year in which such calculation is made and divided by 365, or, in the case of LIBOR Loans, divided by 360.

Time and Place of Payment

Amounts payable by the Borrower hereunder shall be paid at the Branch of Account in the applicable currency. Amounts due on a day other than a Business Day shall be deemed to be due on the Business Day next following such day. Interest and fees payable under this agreement are payable both before and after any or all of default, maturity date, demand and judgement.

EXCHANGE RATE FLUCTUATION

If, for any reason, the amount of Borrowings outstanding under the Credit Facility, when converted to the Equivalent Amount in Canadian currency, exceeds the amount available under the Credit Facility, the Borrower shall immediately repay such excess or shall secure such excess to the satisfaction of the Bank.

INCREASED COSTS

The Borrower shall reimburse the Bank for any additional cost or reduction in income arising as a result of (i) the imposition of, or increase in, taxes on payments due to the Bank hereunder (other than taxes on the overall net income of the Bank), (ii) the imposition of, or increase in, any reserve or other similar requirement, (iii) the imposition of, or change in, any other condition affecting the Credit Facility imposed by any Applicable Law or the interpretation thereof.

EVIDENCE OF INDEBTEDNESS

The Bank shall open and maintain at the Branch of Account accounts and records evidencing the Borrowings made available to the Borrower by the Bank under this agreement. The Bank shall record the principal amount of each Borrowing, the payment of principal and interest and all other amounts becoming due to the Bank under this agreement.

The Bank’s accounts and records constitute, in the absence of manifest error, conclusive evidence of the indebtedness of the Borrower to the Bank pursuant to this agreement.

The Borrower authorizes and directs the Bank to automatically debit, by mechanical, electronic or manual means, any bank account of the Borrower for all amounts payable by the Borrower to the Bank pursuant to this agreement.

GENERAL ACCOUNT

The Borrower shall establish a current account with the Bank in each of Canadian currency and US currency (each a “General Account”) for the conduct of the Borrower’s day to day banking business. If the balance in a General Account:

(a) is a credit, the Bank may apply, at any time in its discretion, the amount of such credit or part thereof, rounded to the nearest $10,000, as a repayment of Borrowings outstanding by way of RBP Loans or RBUSBR Loans under the Credit Facility, or

(b) is a debit, the Bank may, subject to availability, make available a Borrowing by way of an RBP Loan or RBUSBR Loan under the Credit Facility in an amount, rounded to the nearest $10,000, in Canadian currency or US currency, as applicable, as is required to place the General Account at not less than a zero balance.

CONDITIONS PRECEDENT

The availability of any Borrowing is conditional upon the following:

(a) there exists no Event of Default;

(b) the representations and warranties contained in this agreement are true and correct as of the date hereof;

(c) the Bank has received, in form and substance satisfactory to the Bank:

(i) a duly executed copy of this agreement; and

(ii) a certificate of the Borrower certifying that all applicable representations and warranties are true and correct as of the date hereof and that there exists no Event of Default;

(d) such financial and other information or documents relating to the Borrower or the Guarantor as the Bank may reasonably require.

SECURITY

Security for the Borrowings and all other obligations of the Borrower and the Guarantor to the Bank shall include the following documentation all of which is currently held by the Bank:

(a) Section 426 Bank Act security dated August 4, 1989 granted by the Borrower to the Bank;

(b) guarantee and postponement of claim dated September 14, 1989 made by the Guarantor in favour of the Bank;

(c) general assignment of book debts dated July 29, 1992 granted by the Borrower to the Bank;

(d) Section 426 Bank Act security dated May 10, 1995 granted by the Borrower to the Bank;

(e) Section 426 Bank Act security dated August 3, 2000 granted by the Borrower to the Bank; and

(f) all specific assignments of production revenues and other documentation relating to the foregoing Section 426 Bank Act security;

and the Borrower hereby acknowledges, covenants and agrees that the foregoing security does and shall continue to secure any and all liabilities of the Borrower to the Bank.

REPRESENTATIONS AND WARRANTIES

The Borrower and the Guarantor both represent and warrant to the Bank that:

(a) the Borrower is a corporation validly incorporated and subsisting under the laws of the State of Delaware, and that it is duly registered or qualified to carry on business in the Province of Alberta and in all other jurisdictions where the character of the properties owned by it or the nature of the business transacted by it makes such registration or qualification necessary;

(b) the Guarantor is a corporation validly incorporated and subsisting under the laws of the State of Delaware, and that it is duly registered or qualified to carry on business in all jurisdictions where the character of the properties owned by it or the nature of the business transacted by it makes such registration or qualification necessary;

(c) the execution, delivery and performance by each of the Borrower and the Guarantor of this agreement has been duly authorized by all necessary actions and do not violate their respective constating documents or any Applicable Laws or agreements to which they are subject or by which they are bound;

(d) there is no claim, action, prosecution or other proceeding of any kind pending or threatened against either of them or any of their respective assets or properties before any court or administrative agency which relates to any non-compliance with any Environmental Law or any Release from their respective lands of a Contaminant

into the natural environment or which, if adversely determined, could reasonably be expected to have a material adverse effect upon their respective financial condition or operations or their respective ability to perform their respective obligations under this agreement or any of the Bank’s security, and there are no circumstances of which they are aware which might give rise to any such proceeding which they have not fully disclosed to the Bank;

(e) there is no claim, action, prosecution or other proceeding of any kind pending or threatened against any of them or their respective assets or properties which, if adversely determined, could reasonably be expected to have a material adverse effect upon their respective financial condition or operations or their respective ability to perform their respective obligations under this agreement or any of the Bank’s security, and there are no circumstances of which they are aware which might give rise to any such proceeding which they have not fully disclosed to the Bank;

(f) no event has occurred which constitutes, or which, with notice, lapse of time, or both, would constitute, a breach of any covenant or other term or condition of this agreement or any material provision of the security granted in favour of the Bank given in connection therewith;

(g) the Borrower’s most recent consolidated financial statements provided to the Bank fairly present its financial position as of the date thereof and the results of its operations and cash flows for the fiscal period covered thereby, and since the date of such financial statements, there has occurred no material adverse change in its consolidated business or financial condition;

(h) each of the Borrower and the Guarantor has good and marketable title to all of their respective properties and assets, free and clear of any encumbrances, other than Permitted Encumbrances;

(i) each of the Borrower and the Guarantor is in compliance in all material respects with all Applicable Laws including, without limitation, all Environmental Laws;

(j) each of the Borrower and the Guarantor possesses all licenses, patents, trade marks, service marks and copyrights, free from material restrictions, that are necessary for the ownership, maintenance and operation of their respective assets and businesses and they are not in violation of any rights of others with respect to the foregoing;

(k) has filed all material tax returns which were required to be filed by them, paid or made provisions for payment of all taxes and Potential Prior-Ranking Claims

(including interest and penalties) which are due and payable, and provided adequate reserves for payment of any tax, the payment of which is being contested;

(l) each of the Loan Documents to which the Borrower is a party as of the date of this agreement constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms;

(m) each of the Loan Documents to which the Guarantor is a party constitutes a legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms; and

(n) except for Permitted Encumbrances, the Designated Oil and Gas Properties and the other property and assets of the Borrower and the Guarantor used in connection therewith are not subject to any mortgage, charge, pledge, lien, assignment, security interest, title retention agreement or other encumbrance.

Representations and warranties are deemed to be repeated as at the time of each Borrowing hereunder.

REPORTING COVENANTS

The Borrower covenants and agrees with the Bank, while this agreement is in effect, to provide the Bank with:

(a) quarterly unaudited consolidated financial statements for the Guarantor within 60 days of each of the first three fiscal quarter ends;

(b) annual audited consolidated financial statements for the Guarantor within 120 days of each fiscal year end;

(c) annual cash flow forecasts for the Borrower for the next following fiscal year, within 120 days of each fiscal year end;

(d) a quarterly Compliance Certificate, substantially in the form of Schedule “D” hereto, within 60 days after each of the first three quarter-ends and 120 days after each year end certifying that the Borrower is in compliance with this agreement;

(e) annual external economic appraisal/engineering report of the Designated Oil and Gas Properties prepared by an accredited, independent firm of consulting petroleum engineers, satisfactory to the Bank, within 120 days of each fiscal year end; and

(f) such other financial and operating statements and reports as and when the Bank may reasonably require.

GENERAL COVENANTS

The Borrower and Guarantor each covenant and agree with the Bank, while this agreement is in effect:

(a) to pay all sums of money when due by it under this agreement;

(b) to provide the Bank with prompt written notice of any event which constitutes, or which, with notice, lapse of time, or both, would constitute an Event of Default;

(c) to give the Bank 30 days prior written notice of any intended change in the ownership of the shares in the capital stock of the Borrower and not to consent to or facilitate the change of ownership of the shares of the Borrower;

(d) to keep its assets fully insured against such perils and in such manner as would be customarily insured by Persons carrying on a similar business or owning similar assets;

(e) to file all material tax returns which are to be filed by it from time to time, to pay or make provision for payment of all taxes (including interest and penalties) and Potential Prior-Ranking Claims when due, and to provide adequate reserves for the payment of any tax, the payment of which is being contested;

(f) to comply in all material respects with all Applicable Laws including, without limitation, all Environmental Laws;

(g) except for Permitted Encumbrances, not to, without the prior written consent of the Bank, which consent shall not be unreasonably withheld or delayed, grant, create, assume or suffer to exist any mortgage, charge, lien, pledge, security interest or other encumbrance affecting any of its properties, assets or other rights;

(h) not to, without the prior written consent of the Bank, which consent shall not be unreasonably withheld or delayed, guarantee or otherwise provide for, on a direct, indirect or contingent basis, the payment of any monies or performance of any obligations by any other Person;

(i) not to, without the prior written consent of the Bank, which consent shall not be unreasonably withheld or delayed, merge, amalgamate, or otherwise enter into any other form of business combination with any other Person;

(j) to provide the Bank with prompt written notice of any non-compliance by the Borrower or the Guarantor with any Environmental Laws or any Release from the land of the Borrower or the Guarantor of a Contaminant into the natural environment provided that such non-compliance or Release could reasonably be expected to have a material adverse effect upon their respective financial condition or operations or their respective ability to perform their respective obligations under this agreement or any of the Bank’s security and to indemnify and save harmless the Bank from all liability of loss as a result of an Environmental Activity or any non-compliance with any Environmental Law;

(k) to permit the Bank or its representatives, from time to time, at reasonable times and on reasonable notice, to visit and inspect the Borrower’s or the Guarantor’s premises, properties and assets and examine and obtain copies of the Borrower’s or the Guarantor’s records or other information and discuss the Borrower’s or the Guarantor’s affairs with the auditors, counsel and other professional advisers of the Borrower or the Guarantor;

(l) not to sell, transfer or otherwise dispose of any of the Designated Oil and Gas Properties (other than a sale of production from the Designated Oil and Gas Properties made in the ordinary course of business) or any substantial portion of its other petroleum and natural gas reserves and other property and assets used in connection therewith without the prior written consent of the Bank, such consent not to be unreasonably withheld; and

(m) to grant, upon the request of the Bank, security in favour of the Bank (in form and substance satisfactory to the Bank, acting reasonably), on any petroleum and natural gas reserves and other property and assets used in connection therewith now owned or hereafter acquired by the Borrower or the Guarantor; and

(n) provide, upon the request of the Bank, an opinion of legal counsel to the Borrower and the Guarantor with respect to this agreement and such other matters as may be required by the Bank.

EVENTS OF DEFAULT

Without limiting any other rights of the Bank under this agreement, if any one or more of the following events (herein an “Event of Default”) has occurred and is continuing:

(i) the Borrower fails to pay when due and payable any principal amount owing under this agreement, or the Borrower fails to pay when due and payable, interest, fees or

other non-principal amounts due under this agreement for a period of three Business Days;

(ii) failure of the Borrower or the Guarantor to observe or perform any covenant or provision of the Loan Documents for a period of ten Business Days (or such longer period as may reasonably be required to remedy such failure, provided the Borrower or the Guarantor, as the case may be, is diligently pursuing such remedy and there is no material adverse effect on the position of the Bank);

(iii) default, subject to any applicable cure periods, by the Borrower or the Guarantor under any obligation to repay borrowed money when due (other than amounts borrowed pursuant to the provisions of this agreement), or in the performance or observance of any agreement or condition in respect of borrowed money (other than amounts borrowed pursuant to the provisions of this agreement) if, as a result thereof, the requirement to repay such borrowed money has been or may be accelerated;

(iv) any representation or warranty made or deemed to have been made herein or in any certificate or security provided for herein shall be false or inaccurate in any materially adverse respect;

(v) the Borrower or Guarantor is unable to pay its debts as such debts become due, or is, or is adjudged or declared to be, or admits to being, bankrupt or insolvent;

(vi) any notice of intention is filed or any voluntary or involuntary case or proceeding is filed or commenced for (i) the bankruptcy, liquidation, winding-up, dissolution or suspension of general operations of the Borrower or Guarantor, or (ii) the composition, re-scheduling, reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the debts of the Borrower or Guarantor, or (iii) the appointment of a trustee, receiver, receiver and manager, liquidator, administrator, custodian or other official for, all or any significant part of the assets of the Borrower or Guarantor, or (iv) the possession, foreclosure or retention, or sale or other disposition of, or other proceedings to enforce security over, all or any significant part of the assets of the Borrower or Guarantor taken as a whole;

(vii) any secured creditor, encumbrancer or lien or, or any trustee, receiver, receiver and manager, agent, bailiff or other similar official appointed by or acting for any secured creditor, encumbrancer or lien or, takes possession of, or forecloses or retains, or sells or otherwise disposes of, or otherwise proceeds to enforce security over all or any significant part of the assets of the Borrower or Guarantor taken as a whole or gives notice of its intention to do any of the foregoing;

(viii) if the Borrower or the Guarantor ceases to maintain its corporate existence as a validly subsisting corporate entity;

(ix) if, other than with the consent of the Bank, any of the Loan Documents shall for any reason become invalid or no longer in effect or if any of the property or assets subject to the Security shall be subject to any prior mortgage, charge, lien, pledge, assignment, security interest or other encumbrance other than a Permitted Encumbrance; and

(x) if the Borrower shall cease to be, directly or indirectly, a wholly-owned subsidiary of the Guarantor;

then, in such event, the ability of the Borrower to make further Borrowings under the Credit Facility shall immediately terminate and the Bank may, by written notice to the Borrower, declare the Borrowings outstanding under the Credit Facility to be immediately due and payable. Upon receipt of such written notice, the Borrower shall immediately pay to the Bank all Borrowings outstanding under the Credit Facility and all other obligations of the Borrower to the Bank in connection with the Credit Facility under this agreement including, without limitation, an amount equal to the aggregate of the face amounts of all BAs, LCs which are unmatured or unexpired, which amount shall be held by the Bank as security for the Borrower’s obligations to the Bank in respect of such instruments or contracts. The Bank may enforce its rights to realize upon its security and retain an amount sufficient to secure the Bank for the Borrower’s obligations to the Bank in respect of such contracts or instruments.

SUCCESSORS AND ASSIGNS

This agreement shall be binding upon and enure to the benefit of the parties and their respective successors and permitted assigns.

The Bank may assign all or part of its rights and obligations under this agreement to any Person. The rights and obligations of the Borrower under this agreement may not be assigned without the prior written consent of the Bank.

The Bank may disclose to potential or actual assignees confidential information regarding the Borrower (including, any such information provided by the Borrower to the Bank) and shall not be liable for any such disclosure.

GENERAL

Expenses

The Borrower agrees to pay all reasonable fees (including legal fees), costs and expenses incurred by the Bank in connection with the preparation, negotiation and documentation of this agreement and the security provided for herein and the operation or enforcement of this agreement and the security provided for herein.

Review

The Bank may conduct periodic reviews of the affairs of the Borrower, as and when determined by the Bank, for the purpose of evaluating the financial condition of the Borrower. The Borrower shall make available to the Bank such financial statements and other information and documentation as the Bank may reasonably require and shall do all things reasonably necessary to facilitate such review by the Bank.

Potential Prior-Ranking Claims

The Borrower hereby grants its consent (such grant to remain in force as long as this agreement is in effect or any Borrowings are outstanding) to any Person having information relating to any Potential Prior-Ranking Claim arising by any law, statute, regulation or otherwise and including, without limitation, claims by or on behalf of government to release such information to the Bank at any time upon its written request for the purpose of assisting the Bank to evaluate the financial condition of the Borrower.

Set Off

The Bank is authorized, but not obligated, at any time, to apply any credit balance, whether or not then due, to which the Borrower is entitled on any account in any currency at any branch or office of the Bank in or towards satisfaction of the obligations of the Borrower due to the Bank under this agreement. The Bank is authorized to use any such credit balance to buy such other currencies as may be necessary to effect such application.

Non-Merger

The provisions of this agreement shall not merge with any security provided to the Bank, but shall continue in full force for the benefit of the parties hereto.

Amendments and Waivers

No amendment or waiver of any provision of this agreement will be effective unless it is in writing signed by the Borrower and the Bank. No failure or delay, on the part of the Bank, in exercising any right or power hereunder or under any security document shall operate as a waiver thereof. The Guarantor agrees that the amendment or waiver of any provision of this agreement (other than agreements, covenants or representations expressly made by the Guarantor herein, if any) may be made without and does not require the consent or agreement of, or notice to, the Guarantor.

Severability

If any provision of this agreement is or becomes prohibited or unenforceable in any jurisdiction, such prohibition or unenforceability shall not invalidate or render unenforceable the provision concerned in any other jurisdiction nor invalidate, affect or impair any of the remaining provisions of this agreement.

Life Insurance Options

The Borrower acknowledges that Borrowings are not insured under the Bank’s Business Loan Insurance Program.

Judgement Currency

If for the purpose of obtaining judgement in any court in any jurisdiction with respect to this agreement, it is necessary to convert into the currency of such jurisdiction (the “Judgement Currency”) any amount due hereunder in any currency other than the Judgement Currency, then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgement is given, For this purpose “rate of exchange” means the rate at which the Bank would, on the relevant date, be prepared to sell a similar amount of such currency in the Toronto foreign exchange market, against the Judgement Currency, in accordance with normal banking procedures.

In the event that there is a change in the rate of exchange prevailing between the Business Day before the day on which judgement is given and the date of payment of the amount due, the Borrower will, on the date of payment, pay such additional amounts as may be necessary to ensure that the amount paid on such date is the amount in the Judgement Currency which, when converted at the rate of exchange prevailing on the date of payment, is the amount then due under this agreement in such other currency together with interest at RBP and reasonable expenses (including legal fees on a solicitor and client basis). Any additional amount due from the Borrower under this section will be due as a separate debt and shall not be affected by judgement being obtained for any other sums due under or in respect of this agreement.

Governing Law

This agreement shall be construed in accordance with and governed by the laws of the Province of Alberta and of Canada applicable therein.

Whole Agreement

This agreement, the security and any other written agreement delivered pursuant to or referred to in this agreement constitute the whole and entire agreement between the parties in respect of the Credit Facility. There are no verbal agreements, undertakings or representations in connection with the Credit Facility.

Joint and Several

Where more than one Person is liable to Borrower or Guarantor for any obligation under this agreement, then the liability of each such Person for such obligation is joint and several with each other such Person.

Counterpart Execution

This agreement may be executed in any number of counterparts and by different parties in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together constitute one and the same instrument.

Time

Time shall be of the essence in all provisions of this agreement.

Conflict

In the event of a conflict among the terms of this agreement and the security for the Borrowings (such that the terms of such documents cannot co-exist) then the terms of this agreement shall prevail.

Acceptance

This offer is open for acceptance until May 12, 2006, after which date it will be null and void, unless extended in writing by the Bank.

Please confirm your acceptance of this agreement by signing the attached copy of this letter in the space provided below and returning it to the undersigned.

Yours truly,

/s/ Christopher RiceAuthorized Signatory

We acknowledge and accept the foregoing terms and conditions as of May 11, 2006.

BARNWELL OF CANADA, LIMITED
Per:	/s/ Russell M. Gifford
	Name:	Russell M. Gifford
	Title:	Vice President and Chief Financial Officer

Per:
	Name:
	Title:

I/We have authority to bind the corporation.

We acknowledge and confirm our agreement with the foregoing terms and conditions, as Guarantor, as of May 11, 2006.

BARNWELL INDUSTRIES, INC.
Per:	/s/ Russell M. Gifford
	Name:	Russell M. Gifford
	Title:	Executive Vice President and Chief Financial Officer

Per:
	Name:
	Title:

I/We have authority to bind the corporation.

Schedule “A” to the agreement dated May 11, 2006, between Barnwell of Canada, Limited, as Borrower, and Royal Bank of Canada, as the Bank.

DEFINITIONS

For the purpose of this agreement, the following terms and phrases shall have the following meanings:

“Applicable Laws” means, with respect to any Person, property, transaction or event, all present or future applicable laws, statutes, regulations, rules, orders, codes, treaties, conventions, judgements, awards, determinations and decrees of any governmental, regulatory, fiscal or monetary body or court of competent jurisdiction in any applicable jurisdiction;

“Bankers’ Acceptance” or “BA” mean a bill of exchange, including a depository bill issued in accordance with the Depository Bills and Notes Act (Canada), drawn on the Bank by, and payable to the order of, the Borrower which have been accepted by the Bank;

“Basis Point” or “bps” means one-hundredth of one percent (0.01%);

“Borrowing Base” means the amount determined by the Bank from time to time pursuant to this agreement not exceeding at any time the lesser of:

(a) the amount determined by multiplying a fraction, the numerator of which is one hundred and the denominator of which is one hundred forty (100/140), by the net present value of the Designated Oil and Gas Properties, determined by discounting at the rate of the Bank then customarily used for such purposes the anticipated net cash flow before income tax from such Designated Oil and Gas Properties using the Bank’s then current projections of oil and gas prices and other reasonable assumptions affecting such net cash flow; and

(b) the amount of Borrowings by way of RBP Loans which could be repaid during the Term Period (or the remaining portion thereof, as the case may be) in accordance with the provisions of this agreement from the anticipated net cash flow over the half-life of the Designated Oil and Gas Properties, using the Bank’s then current projections of oil and gas prices, general and administrative expenses, interest rates and other reasonable assumptions affecting such net cash flow after deducting from such net cash flow anticipated interest payable in respect of such RBP Loans and other amounts payable under this agreement;

all as determined by the Bank in accordance with the foregoing and its customary practices and standards for oil and gas loans;

“Branch of Account” means the branch of the Bank at which the Borrower’s accounts are maintained. As at the date of this agreement, the “Branch of Account” is the Bank’s branch at 339 - 8^th Avenue S.W., Calgary, Alberta;

“Business Day” means a day, excluding Saturday, Sunday and any other day which shall be a legal holiday or a day on which banking institutions are closed in the province of the Branch of Account;

“Contaminant” includes, without limitation, any pollutant, dangerous substance, liquid waste, industrial waste, hazardous material, hazardous substance or contaminant including any of the foregoing as defined in any Environmental Law;

“Designated Oil and Gas Properties” means oil and gas properties in which the Borrower or the Guarantor have an interest and which are evaluated in the annual external economic appraisal/engineering report provided to the Bank hereunder and which are subject to the security for the Borrowings provided for herein;

“Environmental Activity” means any activity, event or circumstance in respect of a Contaminant, including, without limitation, its storage, use, holding, collection, purchase, accumulation, assessment, generation, manufacture, construction, processing, treatment, stabilization, disposition, handling or transportation, or its Release into the natural environment, including movement through or in the air, soil, surface water or groundwater;

“Environmental Laws” means all Applicable Laws relating to the environment or occupational health and safety, or any Environmental Activity;

“Equivalent Amount” means, with respect to an amount of any currency, the amount of any other currency required to purchase that amount of the first mentioned currency through the Bank in Toronto, in accordance with normal banking procedures;

“Eurocurrency” means US Dollars, Sterling, Swiss Francs, Japanese Yen, or any other currency which is freely convertible on the London Interbank Market;

“Existing Credit Agreement” means, collectively, the credit facility letter agreement dated as of August 4, 1989 between Royal Bank of Canada and Barnwell of Canada, Limited as amended by letter agreements dated April 19, 1990, June 5, 1991, November 20, 1992, March 1, 1993, March 1, 1994, February 28, 1995, February 29, 1996, February 28, 1997, February 27, 1998, April 28, 2000, May 1, 2001, October 3, 2002, July 7, 2003, May 1, 2004 and March 23, 2005;

“GAAP” means, generally accepted accounting principles in effect from time to time in Canada applied in a consistent manner from period to period;

“Guarantor” means Barnwell Industries, Inc.;

“Interest Determination Date” means, with respect to a Libor Loan, the date which is 2 Business Days before the first day of the Libor Interest Period applicable to such Libor Loan;

“Letter of Credit” or “LC” means a documentary credit issued by the Bank on behalf of the Borrower for the purpose of paying suppliers of goods;

“Libor” means, with respect to each Libor Interest Period applicable to a Libor Loan, the annual rate of interest (rounded upwards, if necessary, to the nearest whole multiple of one sixteenth of one percent (1/16th%)), at which the Bank, in accordance with its normal practice, would be prepared to offer deposits to leading banks in the London Interbank Market for delivery on the first day of each of such Libor Interest Period, for a period equal to each such Libor Interest Period, such deposits being in US currency for other agreed upon Eurocurrency specified herein) of comparable amounts to be outstanding during such Libor Interest Period, at or about 10:00 a.m. (Toronto time) on the Interest Determination Date;

“Libor Interest Date” means with respect to any Libor Loan, the last day of each Libor Interest Period and, if the Borrower selects a Libor Interest Period for a period longer than 3 months, the Libor Interest Date shall be the date falling every 3 months after the beginning of such Libor Interest Period as well as the last day of such Libor Interest Period;

“Libor Interest Period” means, with respect to any Libor Loan, the initial period (subject to availability) of approximately 1 month (or longer whole multiples of 1 month to and including 6 months as selected by the Borrower and notified to the Bank by written notice) or such shorter or longer period as the Bank in its sole discretion shall make available commencing on the date on which such Libor Loan is made or another method of Borrowing is converted to a Libor Loan, as the case may be, and thereafter, while such Libor Loan is outstanding, each successive period (subject to availability) of 1 month (or longer whole multiples of 1 month to and including 6 months, as selected by the Borrower and notified to the Bank by written notice) commencing on the last day of the immediately preceding Libor Interest Period;

“Loan Documents” means this agreement (as hereafter amended, supplemented or restated from time to time), each document creating or stated to create security for the Borrowings and all other agreements creating or which are stated to create rights in favour of the Bank which are executed by the Borrower or the Guarantor and are delivered to the Bank pursuant to this agreement or which are executed by any other person granting security in favour of the Bank at the request of the Borrower and are delivered to the Bank pursuant to this agreement;

“Maturity Date” means 2 years from the Term Date;

“Permitted Encumbrances” means, in respect of the Borrower or the Guarantor:

(i) liens arising by operation of law (including, without limitation, liens for taxes, assessments and governmental charges) for amounts not yet due or delinquent, minor encumbrances on real property such as easements and rights of way which do not materially detract from the value of such property, and security given to municipalities and similar public authorities when required by such authorities in connection with the operations of the Borrower or the Guarantor, as the case may be, in the ordinary course of business;

(ii) liens incurred in the ordinary course of the oil and gas business in respect of the joint production and processing facilities and related production and processing facilities, take or pay obligations under gas sales contracts, pooling and unitization agreements and similar arrangements; provided such liens do not materially reduce the value of the oil and gas properties affected by such liens;

(iii) any interest of a third party under any pooling, unit, development, farmout, overriding royalty, net profits interest, carried interest, reversionary interest or operating agreement affecting the oil and gas properties of the Borrower or the Guarantor; provided such interest was in existence as of the date of this agreement or does not materially detract from the value of such oil and gas properties;

(iv) any right of first refusal in effect on the date hereof in favour of any person affecting all or any part of the oil and gas properties of the Borrower or the Guarantor;

(v) liens for penalties arising under non-participation provisions of operating procedures and similar agreements as a consequence of the Borrower’s non-participation in drilling or other exploratory or development operations; provided such liens do not materially detract from the value of any Designated Oil and Gas Property;

(vi) liens incurred under contracts entered into in the ordinary course of business for the sale of petroleum substances from the oil and gas properties of the Borrower or the Guarantor; provided such liens arise under the contracts known to the Bank as of the date of this agreement and

related only to the right to take petroleum substances without payment therefore;

(vii) the terms and conditions of the documents of title affecting the oil and gas properties of the Borrower or the Guarantor;

(viii) liens arising in connection with workers’ compensation, unemployment insurance, pension, employment or other social benefits laws or other regulations which are not yet due or delinquent or the validity of which is being contested in good faith;

(ix) liens under or pursuant to any judgment rendered or claim filed which are or will be appealed in good faith provided any execution thereof has been stayed;

(x) liens arising by operation of law such as builder’s liens, carrier’s liens, materialmen’s liens and other liens of a similar nature which relate to obligations not due or delinquent;

(xi) security granted in favour of the Bank; and

(xii) such other encumbrances as may be approved by the Bank from time to time;

“Person” includes an individual, a partnership, a joint venture, a trust, an unincorporated organization, a company, a corporation, an association, a government or any department or agency thereof, and any other incorporated or unincorporated entity;

“Potential Prior-Ranking Claims” means all amounts owing or required to be paid, where the failure to pay any such amount could give rise to a claim pursuant to any law, statute, regulation or otherwise, which ranks or is capable of ranking in priority to the Bank’s security or otherwise in priority to any claim by the Bank for repayment of any amounts owing under this agreement;

“REP” and “Royal Bank Prime” each means the annual rate of interest announced by the Bank from time to time as being a reference rate then in effect for determining interest rates on commercial loans made in Canadian currency in Canada;

“RBUSBR” and “Royal Bank US Base Rate” each means the annual rate of interest announced by the Bank from time to time as a reference rate then in effect for determining interest rates on commercial loans made in US currency in Canada;

“Release” includes discharge, spray, inject, inoculate, abandon, deposit, spill, leak, seep, pour, emit, empty, throw, dump, place and exhaust, and when used as a noun has a similar meaning;

“Revolving Period” means the period of time from the date of acceptance of this agreement to and including the Term Date;

“Term Date” means April 30, 2007 or, if such date is extended pursuant to the Extension of the Credit Facility section of this agreement, the date to which it has been extended;

“Term Period” means the period of time commencing on the Term Date and ending on the Maturity Date; and

“US” means United States of America.

Schedule “B” to the agreement dated May 11, 2006, between Barnwell of Canada, Limited, as Borrower, and Royal Bank of Canada, as the Bank.

NOTICE REQUIREMENTS

Notice Requirements for other than Libor Loans:

Amount	Prior Notice
Under $10,000,000, Canadian or US currency	By 10:00 a.m. on the day of Borrowing
$10,000,000 up to but not including $25,000,000, Canadian or US currency	By 10:00 a.m. 1 Business Day prior to the day of Borrowing
$25,000,000 up to but not including $50,000,000, Canadian or US currency	By 10:00 a.m. 2 Business Days prior to the day of Borrowing

Notice Requirements for Libor Loans:

Amount	Prior Notice
Under $10,000,000 in US currency or any Equivalent Amount in Eurocurrency and up to 1 year rollovers	By 10:00 a.m. on the Interest Determination Date
$10,000,000 up to but not including $50,000,000 in US currency or any Equivalent Amount in Eurocurrency and up to 1 year rollovers	By 10:00 a.m. 1 Business Day prior to the Interest Determination Date

Schedule “C” to the agreement dated May 11, 2006, between Barnwell of Canada, Limited, as Borrower, and Royal Bank of Canada, as the Bank.

BORROWING CONDITIONS

Borrowings made otherwise than by way of RBP Loans or RBUSBR Loans will be subject to the following terms and conditions:

BAs:

(a) BAs shall be issued and mature on a Business Day and shall be issued in minimum face amounts of $500,000 or such larger amount as is a whole multiple of $100,000 for terms of not less than 30 and not more than 180 days;

(b) the Bank may, in its sole discretion, subject only to market availability, refuse to accept the Borrower’s drafts or limit the amount of any BA issue at any time and in such case the Bank shall make available to the Borrower a loan at a rate equivalent to the BA rate as determined by the Bank;

(c) notwithstanding any other provision of this agreement, the Borrower shall indemnify the Bank against any loss, cost or expense incurred by the Bank if any BA is repaid, prepaid, converted or cancelled other than on the maturity date of such BA;

(d) any BA issued under a term Credit Facility must have a maturity on or before the maturity date of the term Credit Facility, unless otherwise agreed by the Bank; and

(e) prior to the issue of any BA the Borrower shall execute the Bank’s standard form of undertaking and agreement in respect of BAs. If there is any inconsistency at any time between the terms of this agreement and the terms of the Bank’s standard form of undertaking and agreement, the terms of this agreement shall govern.

LCs:

(a) each LC shall expire on a Business Day and shall have a term of not more than 365 days;

(b) at least 2 Business Days prior to the issue of an LC the Borrower shall execute a duly authorized application with respect to such LC and each LC shall be governed by the terms and conditions of the relevant application for such instrument;

(c) an LC may not be revoked prior to its expiry date unless the consent of the beneficiary of the LC has been obtained; and

(d) if there is any inconsistency at any time between the terms of this agreement and the terms of the application for LC, the terms of the application for LC shall govern.

Libor Loans:

(a) Libor Loans shall be issued and mature on a Business Day and shall be made in minimum amounts of $1,000,000 in US currency or the Equivalent Amount in Eurocurrency as selected by the Borrower and approved by the Bank for terms of not less than 30 days and not more than 360 days;

(b) if the Borrower fails to select and to notify the Bank of the Libor Interest Period applicable to any Libor Loan, the Borrower shall be deemed to have selected a 3 month Libor Interest Period;

(c) the Borrower shalt indemnify and hold the Bank harmless against any loss, cost or expense (including without limitation, any loss incurred by the Bank in liquidating or redeploying deposits acquired to fund or maintain any Libor Loan) incurred by the Bank as a result of:

(i) repayments, prepayments, conversions, rollovers or cancellations of a Libor Loan other than on the last day of the Libor Interest Period applicable to such Libor Loan, or

(ii) failure to draw down a Libor Loan on the first day of the Libor Interest Period selected by the Borrower, and

(d) if the Bank determines, which determination is final, conclusive and binding upon the Borrower, that:

(i) adequate and fair means do not exist for ascertaining the rate of interest on a Libor Loan,

(ii) the making or the continuance of a Libor Loan has become impracticable by reason of circumstances which materially and adversely affect the London Interbank Market,

(iii) deposits in US currency (or other Eurocurrency selected) are not available to the Bank in the London Interbank Market in sufficient amounts in the

ordinary course of business for the applicable Libor Interest Period to make or maintain a Libor Loan during such Libor Interest Period, or

(iv) the cost to the Bank of making or maintaining a Libor Loan does not accurately reflect the effective cost to the Bank thereof or the costs to the Bank are increased or the income receivable by the Bank is reduced in respect of a Libor Loan,

then the Bank shall promptly notify the Borrower of such determination and the Borrower shall, prior to the next Interest Determination Date, notify the Bank as to the basis of Borrowing it has selected in substitution for such Libor Loan. If the Borrower does not so notify the Bank, such Libor Loan will automatically be converted into an RBUSBR Loan on the expiry of the then current Libor Interest Period.

Schedule “D” to the agreement dated May 11, 2006, between Barnwell of Canada, Limited as Borrower, and Royal Bank of Canada, as the Bank.

COMPLIANCE CERTIFICATE

I ,     Russell M. Gifford    , the Vice President and CFO of Barnwell of Canada, Limited (the “Borrower”) hereby certify as of May 11, 2006:

1. I am familiar with and have examined the provisions of the amended and restated letter loan agreement (the “Agreement”) dated May 11, 2006 between Barnwell of Canada, Limited, as Borrower, and Royal Bank of Canada (the “Bank”), as the Bank, and have made reasonable investigations of corporate records and inquiries of other officers and senior personnel of the Borrower and Guarantor. Terms defined in the Agreement have the same meanings when used in this certificate.

2. The representations and warranties contained in the Agreement are true and correct.

3. No event or circumstance has occurred which constitutes or which, with the giving of notice, lapse of time, or both, would constitute an Event of Default under the Agreement and there is no reason to believe that during the next fiscal quarter of the Borrower, any such event or circumstance will occur.

Dated this 11^th day of May,2006.

Per:	/s/ Russell M. Gifford
	Name:	Russell M. Gifford
	Title:	Vice President and Chief Financial Officer

EX-10.11

Exhibit No. 10.11

January 12, 2015

Kaupulehu 2007 LLLP and
Barnwell Industries, Inc.
Attn: Terry Johnston
1100 Alakea Street, Suite 2900
Honolulu, HI 96813

RE: Term Loan No. 22000-00039
Adjustable Rate Promissory Note dated March 28, 2011 for $12,500,000.00 and Loan Agreement dated March 28, 2011 and First Loan Modification Agreement
Dated September 4, 2012

Secured By: Kaupulehu Lots #34 and #36 (Kaupulehu Resorts), North Kona, HI
TMK: (3) 7-2-031-026 & 028

Gentlemen:

American Savings Bank (“Bank”) has approved your request to amend the $12,500,000.00 term loan made by the Bank to Kaupulehu 2007 LLLP, a Hawaii limited liability limited partnership and Barnwell Industries, Inc., a Delaware corporation (the “Borrowers”) and Terry Johnston (the “Guarantor”) as follows:

• Amend monthly principal and interest payments to monthly interest only payments starting February 1, 2015 through loan maturity of April 1, 2018.

– Interest rate of 3.4100% will remain the same until the next interest rate change date of April 1, 2015. Interest rate will change annually on April 1st until loan maturity.

– Unpaid principal balance as of January 9, 2015 is $3,653,618.35.

– All references to “Note”, “Loan Agreement”, and “Loan Modification Agreement” contained in any of the Loan Documents shall hereafter mean the Note, the Loan Agreement and the Loan Modification Agreement, as modified by this Letter Agreement.

– All other terms, conditions and provisions contained in the Loan Documents shall remain in full force and effect and unchanged.

The parties hereto agree that this agreement may be executed in counterparts and by facsimile signatures, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or same counterparts. For all purposes, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

If the foregoing terms and conditions are satisfactory to you, please so indicate by signing and returning this letter, and having the guarantor of the loan sign and return this letter, by January 20, 2015 via email and mail the original executed letter to us. Should you have any questions, or if I may be of any further assistance, please do not hesitate to contact me at (808) 538-2072.

Very truly yours,

/s/ Alvin Takahashi

Alvin Takahashi
Vice President

Acknowledged and Accepted:

KUPULEHU 2007 LLLP
a Hawaii limited liability limited partnership

By BARNWELL MAKAI, INC.
a Hawaii corporation
Its General Partner

By /s/ Alexander C. Kinzler

ALEXANDER C. KINZLER
Its President

By /s/ Russell M. Gifford

RUSSELL M. GIFFORD
Its Vice President

BARNWELL INDUSTRIES, INC.
a Delaware corporation

By /s/ Alexander C. Kinzler

ALEXANDER C. KINZLER
Its President

By /s/ Russell M. Gifford

RUSSELL M. GIFFORD
Its Vice President

“Borrower”

By signing below, the undersigned guarantor of the loan hereby: (a) consent to the foregoing terms and conditions; (b) agree that none of the foregoing shall affect or release the guarantor; and (c) specifically acknowledge and confirm that the guarantor’s guaranty dated March 28, 2011 shall apply to the loan documents, as modified by this letter and all prior modification instruments.

/s/ Terry Johnston        
TERRY JOHNSTON

“Guarantor”

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LOAN AGREEMENT

This Loan Agreement (the “Agreement”) is dated March 28, 2011 and is made by and among KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership (“Kaupulehu”),and BARNWELL INDUSTRIES, INC., a Delaware corporation (“Barnwell”)(Kaupulehu and Barnwell are individually and collectively referred to as the “Borrower”)and AMERICAN SAVINGS BANK, F.S.B., a federal savings bank (“Lender”).

1.Loan Terms.

1.1.Loan Amount and Purpose. Lender will make a loan to Borrower in the principal amount of TWELVE MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($12,500,000.00) (the “Loan”) to be used to refinance a mortgage loan with another lender. The Loan will be available in one disbursement at the closing of the Loan, unless otherwise provided in this Agreement.

The Loan will be evidenced by an Adjustable Rate Promissory Note of even date herewith (the “Note”)made by Borrower and payable to Lender in the original principal amount of the Loan and will be secured by, among other documents, the Mortgage, Security Agreement, Assignment of Leases and Rents, Fixture Filing, and Financing Statement of even date herewith made by Borrower in favor of Lender (the “Mortgage”)covering four (4) lots of real property located at Kaupulehu, Hawaii (bearing Tax Map Key Nos. (3) 7-2-031: 022, 026, 027 and 028), more particularly described in Exhibit “A” attached hereto and made a part hereof. The term “Property” shall mean such real property, together with all buildings, structures and other improvements now or hereafter located thereon (the “Improvements”),and the personal property described in the Mortgage and the other Loan Documents (as defined below) (the “Personalty”).Two (2) of the four lots comprising the Property are improved with a residential house (collectively, the “House Lots”),and the remaining two (2) lots remain finished for future construction of a house thereon (collectively, the “Finished Lots”).

1.2.Interest Rate. The initial interest rate for the Loan shall be three and sixty-seven hundredths percent (3.67%) per annum. The interest rate will be adjusted every twelve (12) months during the term of the Loan as set forth in the Note. Interest shall be computed as provided in the Note. The interest rate may be increased, as set forth in the Note and in this Agreement, in the event Borrower fails to performs its obligations under the Loan Documents.

1.3.Repayment of Loan. Monthly payments of principal and interest, based upon a 7-year amortization schedule, in the amount of $168,968.00 shall be due on the first day of each calendar month. The monthly payments will be changed with every adjustment in the interest rate and with the release of a House Lot or Finished Lot from the lien of the Mortgage. All unpaid principal and interest shall be due on April 1, 2018, unless sooner due as hereinafter provided.

1.3.1.Prepayment. Borrower may prepay the Loan in full or in part at any time, subject to the conditions set forth in the Note.

1.3.2.Late Charges. If any payment due under the Loan is not received by Lender within ten (10) calendar days of the date such payment is due, Borrower shall pay on demand a late charge in a sum equal to five percent (5%) of any amount overdue.

1.3.3.Default Interest Rate. Upon the occurrence and during the continuation of any default under this Agreement, all amounts due under the Loan will, at the option of Lender, bear interest at the default rate of interest set forth in the Note.

1.4.Security for Loan. The security for the Loan shall be the following:

a.The Mortgage, which shall be a first mortgage covering the Property.

b.A perfected security interest in all furniture, fixtures, equipment and other personal property owned by Borrower located on or used in connection with the day-to-day operation of the Property.

c.A first lien perfected security interest in Kaupulehu’s deposit accounts at the Bank, accounts receivable, general intangibles, documents of title, tradenames and licenses, inventory, furniture, fixtures and equipment, now or hereafter acquired located within and outside the State of Hawaii.

1.5.Documentation. At or prior to the closing of the Loan, Borrower must deliver the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Lender:

a.the Loan Documents (which means this Agreement, the Note, the Mortgage, security agreement, financing statements, and any other documents evidencing, securing, guaranteeing or governing the Loan, as they may be extended, renewed or modified from time to time);

b.an American Land Title Association (“ALTA”)title insurance policy insuring Lender that the Mortgage constitutes a valid and enforceable first lien on the Property subject and subordinate only to such liens or other matters as Lender has approved in writing, and with such endorsements as Lender may reasonably require;

c.a financing statement and personal property lien report, advising Lender that a search of the public records discloses no security agreements, chattel mortgages, financing statements, title retention agreements, notices or certificates of tax liens or other instruments or documents filed or recorded against Borrower, except those which may have been approved by Lender in writing;

d.a satisfactory appraisal of the Property done by an appraiser approved by Lender in accordance with the Uniform Standards of Professional Appraisal Practices and federal applications applicable to Lender, reflecting a market value for the Property in an amount acceptable to Lender, demonstrating that the loan when fully funded does not exceed the

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aggregate of eighty percent (80%) of the appraised as-is market value of the House Lots and sixty-five percent (65%) of the appraised as-is market value of the Finished Lots;

e.if requested, a survey of the Property and the improvements thereon certified to Lender in accordance with the standards of the ALTA and the American Congress on Surveying & Mapping;

f.evidence of the casualty and other insurance coverage as required under the Mortgage, this Agreement or otherwise by Lender in writing;

g.if Borrower is not a natural person, copies of Borrower’s or Kaupulehu’s general partner’s (i.e., Barnwell Makai, Inc. (the “General Partner”)) organizational documents and evidence of Borrower’s due formation and good standing (certificate of good standing), as well as due authorization and execution of the Loan Documents;

h.if Borrower is acquiring legal title to the Property, a complete and correct copy of the document conveying title to the Property to Borrower;

i.full payment of all fees, advances and costs, including but not limited to any loan or commitment fees, recording and filing fees, and escrow and title fees;

j.an Environmental Questionnaire and Disclosure Statement prepared and certified by Borrower, or, if Lender requires, an environmental survey of the Property prepared by an environmental consultant satisfactory to Lender;

k.a written opinion or opinions of legal counsel for Borrower and the Guarantor (as defined below), addressed to Lender, covering to Lender’s satisfaction (1) the due authorization, execution, delivery, binding effect and enforceability of the Loan Documents, (2) no undisclosed litigation, (3) no consents or approvals required, (4) no conflicts with or violations of any agreements or laws, and (5) such other matters as Lender may require;

l.a tax clearance certificate or certificates issued by the Department of Taxation of the State of Hawaii, certifying that all taxes due from Kaupulehu to the State of Hawaii have been paid; and

m.such other documents, property information and other assurances as Lender may require.

1.6.Guarantors. Repayment of the Loan shall be guaranteed on a limited basis (as more particularly described in that certain guaranty dated the date hereof (the “Guaranty”)by the following person and/or entity (the “Guarantor”):TERRY JOHNSTON, an individual.

2.Covenants of the Borrower.

Borrower promises to keep each of the following covenants:

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2.1.Payment of Loan. Borrower will pay when due all sums which may be due under the Loan Documents.

2.2.Existence. If Borrower is not a natural person, Borrower shall preserve and maintain Borrower’s legal existence and timely file all necessary and appropriate documents and exhibits and pay all appropriate fees and charges therewith.

2.3.Compliance with Law and Title Encumbrances. Borrower shall comply with all existing and future laws, ordinances, rules, regulations, orders, building restrictions and requirements of, and all permits and approvals from, and agreements with and commitments to, all governmental, judicial or legal authorities having jurisdiction over Borrower, the Property or Borrower’s business conducted thereon or therefrom, and with all restrictive covenants and other title encumbrances encumbering the Property, including without limitation the Environmental Laws (described below and in the Mortgage), the Americans with Disabilities Act, the Federal Fair Housing Act, as amended, Terrorism Laws (meaning Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31, Part 596 of the U.S. Code of Federal Regulations), and the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws, ordinances, regulations, policies and any other requirements of any governmental agency or body (including, without limitation, the United States Department of the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter supplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of the foregoing, or under similar laws, ordinances, regulations, policies or requirements of other States or localities), and any laws, ordinances, rules, regulations or governmental orders the violation of which subjects or may subject the Property or any portion thereof or interest therein to forfeiture or seizure or Borrower or Lender to any civil or criminal fines or penalties (all collectively, the “Requirements”).

2.4.Accounting Records. Borrower shall maintain accurate and proper accounting records and books, and provide Lender with access to such books and accounting records at Lender’s request during normal business hours.

2.5.Taxes and Other Liabilities. Borrower shall pay and discharge when due all of Borrower’s indebtedness, obligations, assessments and taxes, except such as Borrower may in good faith contest or as to which a bona fide dispute may exist, provided that, if requested, Borrower shall provide evidence satisfactory to Lender regarding Borrower’s ability to pay the disputed items in the event they are determined to be justly due.

2.6.Inspection. Borrower grants Lender, its agents and representatives the right to enter and visit the Property at any reasonable time for the purposes of observing, performing appraisals, inspecting the Property, taking soil or groundwater samples, and conducting tests, among other things, to investigate for the presence of Hazardous Substances, as defined in Article 3 below. Borrower must also allow Lender to examine, copy and audit its books and

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records. Lender is under no duty to visit or observe the Property, or to examine any books or records. Any site visit, observation or examination by Lender is solely for the purpose of protecting Lender’s security and preserving Lender’s rights under the Loan Documents. Neither Borrower nor any other party is entitled to rely on any site visit, observation or testing by Lender, its agents or representatives. Lender owes no duty of care to protect Borrower or any other party against, or to inform Borrower or any other party of, any adverse condition affecting the Property, including any defects in the design or construction of any improvements on the Property or the presence of any Hazardous Substances on the Property. Lender is not obligated to disclose to Borrower or any other party any report or findings made as a result of, or in connection with, any site visit, observation or testing by Lender. Prior to entering the Property, Lender must give Borrower reasonable notice of its intent to enter. Lender must exercise reasonable efforts to avoid interfering with Borrower’s use of the Property in connection with the activities permitted under this Section.

2.7.Insurance. Borrower shall maintain insurance under an Insurance Service Office (“ISO”)Commercial Property Special Cause of Loss Form, or its equivalent, and shall include coverage for the perils of windstorm and hurricane, and such other perils as may be required by Lender from time to time. Such insurance shall cover:

1.    All buildings now or hereafter erected on the premises and shall include debris removal without limitation.

2.    All leasehold improvements (whether installed or required at the landlord’s or tenant’s expense).

3.    All business personal property owned and/or used in Borrower’s business, including leasehold improvements (whether installed or required at the landlord’s or tenant’s expense).

The policy or policies shall include full replacement cost coverage, an agreed value endorsement, and building ordinance coverage (including coverage for contingent liability from operation of building laws, demolition and increased cost of construction).

If the premises are located within an area designated as a special flood hazard area by the Federal Emergency Management Agency (or any successor or other applicable agency or department), Borrower shall also maintain flood damage insurance in such form and amounts as may be required or provided by the National Flood Insurance Program.

Borrower shall also maintain an ISO Commercial General Liability Policy with respect to the Property, on an occurrence basis, naming Lender as an additional insured, with minimum limits of not less than ONE MILLION AND NO/100 DOLLARS (US $1,000,000.00) for any occurrence and TWO MILLION AND NO/100 DOLLARS (US $2,000,000.00) in the general aggregate, or such other amount as required by Lender from time to time, with coverage for bodily injury and property damage, products and completed operations, and personal and advertising injury.

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Any insurance required by this Loan Agreement shall be written by a company or companies lawfully authorized to do business in the State of Hawaii. All insurance policies and renewals thereof shall be in form acceptable to Lender and shall be specifically endorsed to name Lender as an additional insured, provide not less than thirty (30) days written notice to Lender of cancellation of the policy or policies, and contain a standard mortgagee clause and a standard lender’s loss payable clause. If Borrower shall procure any other insurance covering the improvements on the premises, any such policy or policies shall likewise be specifically endorsed to name Lender as an additional insured, provide not less than thirty (30) days written notice to Lender of cancellation of the policy or policies, and contain a standard mortgagee clause and a standard lender’s loss payable clause, and will be claimable by Lender for application in accordance with this paragraph, and, whether or not so made payable, may be recovered by Lender by any appropriate proceeding and be similarly applied.

Borrower, at least annually, will provide Lender with satisfactory written proof that Borrower is maintaining all required insurance. All premiums on insurance policies shall be paid by Borrower, when due, directly to the insurance carrier, unless otherwise directed by Lender. Lender shall have the right to hold the policies and renewals thereof. If Borrower fails to carry any required insurance, or fails to provide Lender with satisfactory written proof that all required insurance is being maintained, then Lender, at its option but without being obligated to do so, may procure such insurance from year to year and pay the premiums therefor, and Borrower will reimburse Lender on demand for premiums so paid, with interest thereon from the date Lender pays such premiums at the default interest rate set forth in the Note, and all such sums shall be secured by this Mortgage.

In the event of loss, Borrower shall give notice promptly to the insurance carrier and Lender. Lender may make proof of loss if not made promptly by Borrower.

If the Property is damaged or destroyed, then the proceeds of the insurance insuring against such damage or destruction will be applied, at Lender’s option, to repair, restore or rebuild the Property according to the original plans and elevations therefor, or according to such modified plans conforming to laws and ordinances then in effect as shall be approved by Borrower and Lender in writing, or to reduce the amount Borrower owes to Lender under the Note and under the Mortgage. Any such proceeds not used to repair, restore or rebuild the Property shall be applied to the sums secured by the Mortgage. If the insurance proceeds are to be applied to the sums secured by the Mortgage, then the excess proceeds, if any, shall be paid to Borrower. If the Property is abandoned by Borrower, or if Borrower fails to respond to Lender within thirty (30) days from the date notice is mailed by Lender to Borrower that the insurance carrier offers to settle a claim for insurance benefits, Lender is authorized to collect and apply the insurance proceeds to restoration or repair of the Property.

Unless Lender and Borrower otherwise agree in writing, any such application of proceeds to principal shall not excuse or postpone the due date of any installment called for under the Note or change the amount of any such installments. If Lender acquires the Property pursuant to the provisions of the Mortgage, all right, title and interest of Borrower in and to any insurance policies and in and to the proceeds thereof resulting from damage to the Property prior to the sale

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or acquisition shall pass to Lender to the extent of the sums secured by the Mortgage immediately prior to such sale or acquisition.

2.8.Preservation of Rights. Borrower shall obtain, preserve and maintain in good standing, as applicable, all licenses and governmental approvals, rights, privileges and franchises necessary or desirable for the operation of the Property and the conduct of Borrower’s business thereon and therefrom.

2.9.Maintenance and Repair. Borrower shall (i) maintain the Property, including the parking and landscaping portions thereof, in good condition and repair, (ii) promptly make, or cause tenants to make all necessary structural and non-structural repairs to the Property, and (iii) not demolish, alter, remove or add to any Improvements, excepting the installation or construction of tenant improvements in connection with any leases approved in accordance with this Agreement. Borrower shall pay when due all claims for labor performed and materials furnished therefor in connection with any improvements or construction activities.

2.10.Payment of Expenses. Borrower must pay all costs and expenses incurred by Lender in connection with the making, disbursement and administration of the Loan, including any releases or partial releases of a House Lot or a Finished Lot from the lien of the Mortgage, as well as any revisions, extensions, renewals or “workouts” of the Loan, and in the exercise of any of Lender’s rights or remedies under this Agreement. Such costs and expenses include title insurance, recording and escrow charges, fees for appraisal, environmental services, legal fees and expenses of Lender’s counsel and any other reasonable fees and costs for services, regardless of whether such services are furnished by Lender’s employees or by independent contractors. Borrower acknowledges that the loan fee does not include amounts payable by Borrower under this section. All such sums incurred by Lender and not immediately reimbursed by Borrower are considered additional loans to Borrower secured by the Mortgage and bearing interest at the default rate provided in the Note.

2.11.Affirmative Covenants. For as long as the Loan is outstanding, Borrower will, unless otherwise permitted by Lender in writing, do the following:

a.Barnwell shall provide Lender, within one hundred twenty (120) days of the close of Borrower’s fiscal year, with annual 10-K and annual financial statements, audited by a firm of independent certified public accountants (“CPA”), together with an unqualified CPA opinion to the same.

b.Barnwell shall provide Lender, within sixty (60) days after the end of each quarter of each fiscal year (except for the fiscal year end quarter), a quarterly 10-Q, signed by Borrower.

c.Kaupulehu shall provide copies of its annual federal income tax returns and any extensions thereof, together with all supporting schedules, within sixty (60) days of the applicable filing date.

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d.Guarantor shall provide copies of its annual personal financial statement in form and content acceptable to Lender, and its annual federal income tax returns and any extensions thereof, together with all supporting schedules, within sixty (60) days of the applicable filing date.

e.Promptly from time to time on request, Borrower shall provide or shall cause Guarantor to provide Lender with any other financial or other information concerning its business, conditions and affairs as Lender may reasonably request.

f.Borrower shall conduct and carry on its business in substantially the same field of activity as has been originally planned and as documented in the application for the Loan.

g.Borrower will cause any loans to Kaupulehu from a partner of Kaupulehu or made between Kaupulehu and Barnwell to be subordinated to the Loan.

h.Maintain Barnwell’s financial condition at all times satisfactory to Lender, and maintain a Debt Service Coverage Ratio for the Loan of not less than 1.20 to one.

“Debt Service Coverage Ratio” means Adjusted EBITDA of Barnwell for the twelve (12) months preceding the date of calculation divided by Total Debt Obligations for the same period of time on a rolling four (4) quarters basis. “Adjusted EBIDTA” means earnings before interest, taxes and non-cash expenses, plus (a) cash contributions from minority shareholders, minus (b) 50% of non-financed oil and gas capital expenditures, (b) 100% of other unfinanced capital expenditures (except that for the fiscal year ending September 30, 2011, 50% of other unfinanced capital expenditures shall be used), (c) cash dividends and cash distributions, (d) retirement plan contributions, and (e) stock repurchases. “Total Debt Obligations” is the total amount of the required principal and interest payments payable to Lender and other parties that are unrelated to Barnwell over the twelve-month period preceding the date of calculation.

Borrower shall provide evidence of the maintenance of this Debt Service Coverage Ratio in form and content satisfactory to Lender annually and also at other times upon request by Lender.

i.Maintain a loan to value ratio for the Loan in accordance with the following:

(1)    On the one hundred twentieth (120th) day after the closing of the loan, the then-outstanding principal amount of the loan shall not exceed the aggregate of seventy-five percent (75%) of the appraised as-is market value of the House Lots and sixty-five percent (65%) of the appraised as-is market value of the Finished Lots.

(2)    On the two hundred tenth (210th) day after the closing of the loan, the then-outstanding principal amount of the loan shall not exceed the aggregate of seventy percent (70%) of the appraised as-is market value of the House Lots and sixty-five percent (65%) of the appraised as-is market value of the Finished Lots.

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If the loan to value ratio exceeds such ratio, Borrower shall immediately, upon demand, pay a sum sufficient to reduce the outstanding principal balance of the Loan so that the loan to value ratio shall be less than such ratio.

j.Maintain a Total Liabilities to Consolidated Tangible Net Worth ratio not to exceed 1.85 to one. “Consolidated Tangible Net Worth” means that amount, determined on a consolidated basis in accordance with GAAP, that is equal to the Barnwell’s Total Assets less intangible assets, minus Total Liabilities, plus the principal amount of subordinated debt outstanding. “Total Assets” means all assets of the Barnwell, on a consolidated basis, that should, in accordance with GAAP, be classified as assets on the Barnwell’s financial statements. “Total Liabilities” means all liabilities of the Barnwell, on a consolidated basis, that should, in accordance with GAAP, be classified as liabilities on the Barnwell’s financial statements.

2.12.Negative Covenants. As long as the Loan is outstanding, Borrower shall not, without Lender’s prior written consent, do any of the following:

a.Enter into any merger or consolidation or assign, transfer, sell (including by way of agreement of sale), lease, or otherwise dispose of all or a substantial part of its assets, except in the ordinary course of its business as planned and as documented in the application for the Loan.

b.Change the ownership of Kaupulehu.

c.Declare cash dividends or bonuses to officers, directors, partners, members or owners of Kaupulehu, unless after tax profit was made in the preceding fiscal year and all of Kaupulehu’s debts are paid to current status.

d.Create, incur or permit to exist any liabilities for Kaupulehu resulting from borrowing, loans or advances, secured or unsecured, except for the liabilities of Kaupulehu to Lender under this Agreement.

2.13.Notices. Borrower must promptly notify Lender in writing of:

a.Any litigation affecting Borrower, any co-maker, any guarantor, or the Property, and, if Borrower, any co-maker or any guarantor is other than a natural person or trust, any general partner or controlling shareholder or managing member of Borrower, such co-maker or such guarantor where the amount claimed is $50,000.00 or more; or

b.Any notice that the Property or Borrower’s, any co-maker’s or any guarantor’s business fails in any respect to comply with any applicable law, regulation or court order; or

c.Any material adverse change in the physical condition of the Property or Borrower’s, any co-maker’s or any guarantor’s financial condition or operations or other circumstance that adversely affects Borrower’s intended use of the Property or Borrower’s ability to repay the Loan.

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2.14.Indemnity. Borrower agrees to indemnify, defend with counsel acceptable to Lender, and hold Lender harmless from and against all liabilities, claims, actions, damages, costs and expenses (including all legal fees and expenses of Lender’s counsel) arising out of or resulting from the ownership, operation, use or sale of the Property, whether such claims are based on theories of derivative liability, comparative negligence or otherwise. Notwithstanding anything to the contrary in any other Loan Document, the provisions of this Section 2.14 shall survive the termination of this Agreement, repayment of the Loan and foreclosure of the Mortgage or similar proceedings.

2.15.Performance of Acts. Upon request by Lender, Borrower must perform all acts which may be necessary or advisable to perfect any lien or security interest provided for in the Loan Documents or to carry out the intent of the Loan Documents.

2.16.Notice of Change. Borrower must give Lender prior written notice of any change in:

a.the location of its place of business or its chief executive office if it has more than one place of business; or

b.Borrower’s name or business structure. Unless otherwise approved by Lender in writing, Borrower agrees that all Property that consists of personal property (other than the books and records) will be located at the Property and that all books and records will be located at Borrower’s place of business or chief executive office if Borrower has more than one place of business.

2.17.Income from Property. Borrower must first apply all income derived from the Property, including all income from leases, to pay costs and expenses associated with the ownership, maintenance, operation and leasing of the Property, including all amounts then required to be paid under the Loan Documents, before using or applying such income for any other purpose. No such income is to be distributed or paid to any shareholder, partner, or member of Borrower, or, if Borrower is a trust, to any beneficiary, settlor or trustee, unless all such costs and expenses which are then due have been paid in full.

2.18.Maintenance of Depository Relationship. Borrower shall, at all times while any portion of the Note remains unpaid, maintain a depository relationship with Lender, unless the same is contrary to state or federal law or regulations.

3.Hazardous Substances.

Borrower shall comply with all of the terms, conditions and provisions of the Hazardous Materials Indemnity Agreement of even date herewith regarding the Property and the provisions of the Mortgage regarding Hazardous Substances (which shall mean any substance or material deemed or designated as hazardous or toxic waste, hazardous or toxic material, a hazardous, toxic or radioactive substance, or other similar term, by any and all laws, statutes, ordinances, rules, regulations, orders, or determinations of any governmental authority pertaining to health or the environment in effect in any and all jurisdictions in which Borrower is or at any time may be

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doing business or where Property is located, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, the Resource Conservation and Recovery Act, the Hazardous Materials Transportation Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Pesticide Act, Chapters 128D, 342B-342L, 342N and 342P, Hawaii Revised Statutes, all as amended and including all regulations, permits, and orders as issued thereunder (collectively, the “Environmental Laws”).The provisions of this Section 3 shall survive termination of this Agreement, repayment of the Loan, and foreclosure of the Mortgage or similar proceedings.

4.Representations and Warranties.

Borrower promises that each representation and warranty set forth below is true, accurate and correct.

4.1.Formation; Authority. If Borrower is anything other than a natural person (but not a trustee), it has complied with all laws and regulations concerning its organization, existence and the transaction of its business, and is in good standing in each state in which it conducts its business. Borrower is authorized to execute, deliver and perform its obligations under each of the Loan Documents.

4.2.Compliance With Law. The Property and the actual use thereof by Borrower complies in all material respects with all Requirements. Borrower has received no notices of violations of any Requirements. There are no claims, actions, proceedings or investigations pending or threatened against Borrower or affecting the Property except for those previously disclosed by Borrower to Lender in writing.

4.3.No Violation. The execution and delivery of this Agreement and the other Loan Documents and the performance by Borrower of its obligations hereunder and thereunder will not result in a default under any other material agreement to which Borrower is a party, or violate any Requirements.

4.4.Litigation. There is, to the knowledge of Borrower, no action, suit, proceeding or investigation pending at law or in equity or before any federal, state, territorial, municipal or other governmental department, commission, board, bureau, agency or instrumentality or threatened against or affecting Borrower which might materially adversely affect Borrower’s ability to operate its business or to perform its obligations under the Loan Documents.

4.5.Financial Information. All financial information which has been and will be delivered to Lender, including all information relating to the financial condition of Borrower, any of its partners, shareholders, members, or other principals, any co-maker, any guarantor, and the Property, does and will fairly and accurately represent the financial condition being reported on. As of the date hereof, there has been no material adverse change in any financial condition reported at any time to Lender.

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4.6.Borrower Not a “Foreian Person”. Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended from time to time.

4.7.Disclosure to Co-Makers, Guarantors and Third Parties. Before each, if applicable, co-maker, guarantor or third party executing the Mortgage or other instrument securing or guaranteeing the Loan, became obligated in connection with the Loan, Borrower made full disclosure to that person regarding Borrower’s financial condition and business operations and all other circumstances bearing upon Borrower’s ability to pay and perform its obligations under the Loan Documents.

4.8.Ownership of Property. Kaupulehu owns directly, and not through any affiliated entity, all of the personal property and fixtures necessary for the operation and management of the Property for the uses presently being conducted thereon.

4.9.Commercial Loan. Borrower acknowledges and agrees that the Loan is for a commercial purpose and is not a consumer transaction under the Truth-in-Lending Act, 15 U.S.C. § 1601, et seq., and Regulation Z promulgated thereunder.

5.Default and Remedies.

5.1.Events of Default. Borrower will be in default under this Agreement upon the occurrence of any one or more of the following events (“Event of Default”):

a.Borrower fails to make any payment due under the Note or Borrower fails to make any payment demanded by Lender under any other Loan Document; or

b.Borrower fails to timely observe, perform and comply with any covenant contained in this Agreement other than those referred to in clause (a), and does not cure that failure within thirty (30) calendar days after written notice from Lender; or

c.A default is declared or occurs under any of the other Loan Documents (and, if a cure period is provided with respect to said default, said default is not fully cured within the period provided in said Loan Document for cure of said default); or

d.There shall be a sale, transfer, hypothecation, encumbrance, assignment or conveyance of the Property, or any portion thereof or interest therein, by Kaupulehu without the prior written consent of Lender, except as permitted under the Mortgage and subject to payment of the release price and other conditions set forth in the Mortgage; or

e.Borrower or any guarantor, or its managing general partner, if Borrower is a partnership, or its majority shareholder if Borrower is a corporation, or its manager or managing member if Borrower is a limited liability company, becomes insolvent or the subject of any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships; or

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f.Borrower or any guarantor dissolves, terminates, or liquidates, or any of these events happens to Borrower’s managing general partner if it is a partnership or to its majority shareholder if it is a corporation, or its manager or managing member if Borrower is a limited liability company, or if Borrower is a trust, the trust is revoked or materially modified or there is a change or substitution of the trustee; or

g.Borrower or any guarantor dies or becomes permanently disabled, or any of these events happens to Borrower’s managing general partner, if it is a partnership, or managing member, if it is a limited liability company, its chief executive officer, if it is a corporation, or its trustee, if it is a trust; or

h.Any representation or warranty made or given by Borrower in this Agreement or any other Loan Document proves to be false or misleading in any material respect; or

i.Any guarantor revokes its guaranty or any guaranty becomes ineffective for any reason; or

j.Lender fails to have an enforceable first lien on or security interest in any property given as security for the Loan (except for prior liens approved by Lender in writing); or

k.A judgment in an amount greater than $50,000.00 in excess of any
insurance coverage is entered against Borrower or any co-maker, or any government authority takes action that materially adversely affects Borrower’s intended use of the Property or Borrower’s or any co-maker’s ability to repay the Loan; or

l.Borrower, any co-maker or any person affiliated with Borrower or any co-maker fails to meet the conditions of, or fails to perform any obligation under, any other agreement Borrower or any co-maker has with Lender or any affiliate of Lender. For the purposes of this section, “affiliated with” means in control of, controlled by or under common control with; or

m.Borrower, any co-maker or any person affiliated with Borrower or any co-maker defaults in connection with any credit such person has with any lender, if the default consists of the failure to make a payment when due or gives the other lender the right to accelerate the obligation. For the purposes of this section, “affiliated with” means in control of, controlled by or under common control with; or

n.There is a material adverse change in Borrower’s or any co-maker’s or any guarantor’s financial condition, or an event occurs or condition changes that materially impairs Borrower’s intended use of the Property or Borrower’s or any co-maker’s ability to repay the Loan.

5.2.Remedies. If an Event of Default occurs under this Agreement, Lender may exercise any right or remedy which it has under any of the Loan Documents, or which is otherwise available at law or in equity or by statute, and all of Lender’s rights and remedies shall

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be cumulative. All of Borrower’s obligations under the Loan Documents shall become immediately due and payable without notice of default, presentment or demand for payment, protest or notice of nonpayment or dishonor, or other notices or demands of any kind or character, all at Lender’s option, exercisable in its sole discretion.

Notwithstanding any provision in any of the Loan Documents to the contrary and in addition to the foregoing, in the event Borrower or any co-maker or guarantor shall violate any covenant contained in Section 2.11(a) through (e) of this Agreement, then Lender, at its sole option and upon written notice to Borrower, may increase the interest rate under the Note by one percent (1.0%) from the interest rate then in effect, and adjust the monthly payments due under the Note accordingly. If such violation is cured, then the interest rate shall be reduced to the interest rate then in effect under the provisions of the Note and the monthly payments due under the Note shall be readjusted accordingly.

Notwithstanding any provision in any of the Loan Documents to the contrary and in addition to the foregoing, in the event Borrower or any co-maker or guarantor shall violate any covenant contained in Section 2.11(f) through 2.11(j) of this Agreement, then the interest rate under the Note shall be increased, at Lender’s sole option and upon written notice to Borrower or any co-maker or guarantor, by one percent (1.0%) from the interest rate then in effect and the monthly payments due under the Note shall be adjusted accordingly. If such violation is not cured within 45 days after the increase in the interest rate, then the interest rate will be increased effective at the end of such 45 day period, at Lender’s sole option and upon written notice to Borrower or any co-maker or guarantor, by an additional one percent (1.0%) and the monthly payments due under the Note shall be adjusted accordingly. If such violation is cured, then the interest rate shall be reduced to the interest rate then in effect under the provisions of the Note and the monthly payments due under the Note shall be readjusted accordingly.

Initials:/s/RMG /s/ACK

5.3.Lender’s Right of Setoff. Unless specifically addressed in the Loan Documents, at any time Lender may set off obligations owed by Lender to Borrower (such as balances in checking and savings accounts) against the amounts due under the Loan, whether or not an Event of Default shall have occurred or shall have been declared, and without first resorting to other collateral securing payment of the Loan.

5.4.Provisional Remedies, Self-Help and Foreclosure. No provision of this Article 5 limits the right of any party to this Agreement to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or obtaining provisional or ancillary remedies from a court of competent jurisdiction before, after, or during the pendency of any arbitration or other proceeding. The exercise of a remedy does not waive the right of either party to resort to arbitration or reference. At Lender’s option, foreclosure under a deed of trust or mortgage may be accomplished either by exercise of power of sale under the deed of trust or mortgage or by judicial foreclosure.

6.Miscellaneous Provisions.

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6.1.No Waiver; Consents. No alleged waiver by Lender is effective unless in writing, and no waiver may be construed as a continuing waiver. No waiver is implied from any delay or failure by Lender to take action on account of any default of Borrower. Consent by Lender to any act or omission by Borrower may not be construed as a consent to any other or subsequent act or omission.

6.2.No Third Parties Benefited. This Agreement is made and entered into for the sole protection and benefit of Lender and Borrower and their successors and assigns. No trust fund is created by this Agreement and no other persons or entities have any right of action under this Agreement or any right to the Loan funds.

6.3.Notices. All notices, demands, requests, correspondence or documents which are required or permitted to be given or served hereunder shall be in writing addressed to the appropriate party and personally delivered or sent by first class United States mail, postage prepaid, addressed to Borrower or Lender at the following addresses:

To Borrower:	Kaupulehu 2007, LLLP
	Barnwell Industries, Inc.
	1100 Alakea Street, Suite 2900
	Honolulu, Hawaii 96813
To Lender:	American Savings Bank, F.S.B.
	Commercial Real Estate Loans
	P.O. Box 2300
	Honolulu, Hawaii 96804-2300

Any party may designate a different address by giving notice thereof in accordance with this paragraph. Delivery of any or demand shall be deemed completed on the date of delivery or two (2) business days after the date of mailing, as applicable.

6.4.Attorneys’ Fees. If any lawsuit, reference or arbitration is commenced which arises out of, or which relates to this Agreement, the Loan Documents or the Loan, including any alleged tort action, regardless of which party commences the action, the prevailing party is entitled to recover from each other party such sums as the court, referee or arbitrator may adjudge to be reasonable attorneys’ fees in the action or proceeding, in addition to costs and expenses otherwise allowed by law. Any such attorneys’ fees incurred by either party in enforcing a judgment in its favor under this Agreement are recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligations are intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment. In all other situations, including any bankruptcy or other voluntary or involuntary proceeding, in or out of court, for the adjustment of debtor-creditor relationships, Borrower agrees to pay all of Lender’s costs and expenses, including attorneys’ fees, which may be incurred in any effort to collect or enforce the Loan or any part of it or any

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term of any Loan Document. Attorneys’ fees include the allocated costs for services of in-house counsel.

6.5.Loan Not Assumable. It is expressly understood by Borrower that the Loan is personal to Borrower and may not be assumed by any other person or entity.

6.6.Assignment of Loan. Lender may assign its rights and delegate its obligations under this Agreement or any of the other Loan Documents and further may assign, or sell participations in, all or any part of the Loan, the Loan Documents, or any other interest herein or in the Note to any person or entity, all without notice to or the consent of Borrower or any co-makers or guarantors. To the extent of any such assignment, Lender shall be relieved of its obligations with respect to the Loan and the assignee shall have the same rights, benefits and obligations as it would if it were Lender hereunder and a holder of the Note. Without the consent of or notice to Borrower, Lender may furnish any information (including, without limitation, financial information) concerning the Loan, the Property, or Borrower, any co-makers or guarantors, and any of their assets to third parties from time to time for legitimate business purposes.

6.7.Successors and Assigns. The terms of this Agreement shall bind and benefit the heirs, personal representatives, successors, successors in trust and assigns of the parties; provided, however, that Borrower may not assign this Agreement without the prior written consent of Lender, which consent may be withheld by Lender in its sole discretion for any reason or no reason.

6.8.Interpretation. The language of this Agreement must be construed as a whole according to its fair meaning, and not strictly for or against any party. The word “include(s)” means “include(s), without limitation,” and the word “including” means “including, but not limited to.”

6.9.Miscellaneous. This Agreement may not be modified or amended except by a written agreement signed by the parties. The invalidity or unenforceability of any one or more provisions of this Agreement in no way affects any other provision. If Borrower consists of more than one person or entity, each is jointly and severally liable to Lender for the faithful performance of this Agreement and the other Loan Documents. Time is of the essence in the performance of this Agreement and the other Loan Documents. This Agreement is governed by and construed in accordance with the laws of and decisions of the State of Hawaii and the United States of America and the rules and regulations promulgated thereunder, including without limitation the federal laws, rules and regulations for federal savings and loan associations and federal savings banks. This Agreement may be executed in one or more counterparts, each of which is, for all purposes deemed an original and all such counterparts taken together, constitute one and the same instrument.

6.10.Integration and Relation to Loan Commitment. The Loan Documents fully state all of the terms and conditions of the parties’ agreement regarding the matters mentioned in or incidental to this Agreement. The Loan Documents supersede all oral negotiations and prior writings concerning the subject matter of the Loan Documents.

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6.11.Actions. Lender has the right, but not the obligation, to commence, appear in, and defend any action or proceeding which might affect its security or its rights, duties or liabilities relating to the Loan, the Property, or any of the Loan Documents. Borrower must pay promptly on demand all of Lender’s reasonable out-of-pocket costs, expenses, and legal fees and expenses of Lender’s counsel incurred in those actions or proceedings.

6.12.Relationships with Other Lender Customers. From time to time, Lender may have business relationships with Borrower’s customers, suppliers, contractors, tenants, partners, shareholders, officers or directors, with businesses offering products or services similar to those of Borrower, or with persons seeking to invest in, borrow from or lend to Borrower. Borrower agrees that in no event is Lender obligated to disclose to Borrower any information concerning any other Lender customer. Borrower further agrees that Lender may extend credit to those parties and may take any action it may deem necessary to collect any such credit, regardless of any effect the extension or collection of such credit may have on Borrower’s financial condition or operations.

6.13.Loan Commission. Lender is not obligated to pay any brokerage commission or fee in connection with or arising out of the Loan. Borrower must pay any and all brokerage commissions or fees arising out of or in connection with the Loan and Borrower agrees to indemnify, defend and hold harmless Lender against any claim for any such fees or commissions.

6.14.Standard of Conduct. Nothing contained in this Agreement, the Note, the Mortgage or any other Loan Document shall limit the right of Lender to exercise its business judgment or to act, in the context of the granting or withholding of any consent required under the terms of this Agreement or any other Loan Document, or otherwise, in a subjective manner, whether or not “objectively” reasonable under the circumstances, as long as Lender’s exercise of its business judgment or action, as the case may be, is made or undertaken in good faith. Borrower and Lender intend by the foregoing to set forth and affirm their entire understanding with respect to the standard pursuant to which Lender’s duties and obligations are to be judged and the parameters within which Lender’s discretion may be exercised hereunder and under the other Loan Documents. As used herein, the term “good faith” means honesty in fact in the conduct and transaction concerned.

6.15.Counterparts. This document may be executed in counterparts. Each counterpart shall be executed by one or more of the parties to this document and the several counterparts shall constitute one document to the same effect as though the signature of all the parties were upon the same document.

6.16.Jury Waiver. Lender and Borrower hereby waive trial by jury in any action, proceeding, claim, or counterclaim, whether in contract or tort, at law or in equity, arising out of or in any way related to this Agreement or any of the Loan Documents.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Borrower and Lender have executed these presents the day and year first above written.

KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership
By	BARNWELL MAKAI, INC.,
	a Hawaii corporation
	Its General Partner
By:	/s/ Alexander C. Kinzler
	ALEXANDER C. KINZLER
	Its President

By:	/s/ Russell M. Gifford
	RUSSELL M. GIFFORD
	Its Vice President

BARNWELL INDUSTRIES, INC., a Delaware Corporation
By:	/s/ Alexander C. Kinzler
	ALEXANDER C. KINZLER
	Its President

By:	/s/ Russell M. Gifford
	RUSSELL M. GIFFORD
	Its Vice President
	“Borrower”

AMERICAN SAVINGS BANK, F.S.B.
By:	/s/ Alvin Takahashi
	ALVIN TAKAHASHI
	Its Vice President

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By:	/s/ Peter Yeo
	PETER YEO
	Its Vice President
	“Lender”

STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 28^th day of March, 2011, before me personally appeared ALEXANDER C. KINZLER qpersonally known to me -OR- þproved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such person executed the foregoing instrument as the free act and deed of such person, and if applicable in the capacities shown, having been duly authorized to execute such instrument in such capacities.

/s/ Heather K.H. Agunoy

Heather K.H. Agunoy

Notary Public, State of Hawaii

My commission expires: October 15, 2014

(Official Stamp or Seal)

Doc. Date: undated at time of notarization # Pages: 23
Notary Name: Heather K.H. Agunoy First Circuit
Doc. Description: Loan agreement
/s/ Heather K.H. Agunoy 3/28/11	(Official Stamp or Seal)
Notary Signature Date
NOTARY CERTIFICATION (at time of notarization)

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STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 28^th day of March, 2011, before me personally appeared RUSSELL M. GIFFORD qpersonally known to me -OR- þproved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such person executed the foregoing instrument as the free act and deed of such person, and if applicable in the capacities shown, having been duly authorized to execute such instrument in such capacities.

/s/ Heather K.H. Agunoy

Heather K.H. Agunoy

Notary Public, State of Hawaii

My commission expires: October 15, 2014

(Official Stamp or Seal)

Doc. Date: undated at time of notarization # Pages: 23
Notary Name: Heather K.H. Agunoy First Circuit
Doc. Description: Loan agreement
/s/ Heather K.H. Agunoy 3/28/11	(Official Stamp or Seal)
Notary Signature Date
NOTARY CERTIFICATION (at time of notarization)

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STATE OF HAWAII	)
	)	SS.
CITY AND COUNTY OF HONOLULU	)

On this the 28^th day of March, 2011, before me personally appeared ALVIN TAKAHASHI and PETER YEO qpersonally known to me -OR- qproved to me on the basis of satisfactory evidence who, being by me duly sworn or affirmed, did say that such person executed the foregoing instrument as such person’s(s’) free act and deed as Vice President and Vice President of AMERICAN SAVINGS BANK, F.S.B., on behalf of the corporation having been duly authorized to execute such instrument in such capacity. Witness my hand and official seal.

/s/ Heather K.H. Agunoy

Heather K.H. Agunoy

Notary Public, State of Hawaii

My commission expires: October 15, 2014

(Official Stamp or Seal)

Doc. Date: undated at time of notarization # Pages: 23
Notary Name: Heather K.H. Agunoy First Circuit
Doc. Description: Loan agreement
/s/ Heather K.H. Agunoy 3/28/11	(Official Stamp or Seal)
Notary Signature Date
NOTARY CERTIFICATION (at time of notarization)

-21-

EXHIBIT “A”

-PARCEL FIRST:- (TMK No. (3) 7-2-031-022)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 30 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.271 acres, more or less.

Together with a non-exclusive easement for access purposes over Roadway Easements, as set forth and provided in Kaupulehu Lot 4-A Declaration of Access Easement, dated December 23, 2005, recorded in said Bureau as Document No. 2005-262404; subject to the terms and provisions contained therein.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.    2. Document No. 2009-131370.

Together with non-exclusive easements for access and utility purposes as set forth in the following: (a) Grant of Non-Exclusive Access and Utility Easements, dated May 25, 2009, recorded in said Bureau as Document No. 2009-149017; (b) Grant of Non-Exclusive Access and Utility Easements (Hualalai Resort/Easement A), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149023; and (c) Grant of Non-Exclusive Roadway and Utility Easements (Kukio Frontage Road), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149029; all subject to the terms and conditions contained therein.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I, WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective January 23, 2008, recorded in said Bureau as Document No. 2008-014897.

-PARCEL SECOND:- (TMK No. (3) 7-2-031-026)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 34 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.074 acres, more or less.

Together with a non-exclusive easement for access purposes over Roadway Easements, as set forth and provided in Kaupulehu Lot 4-A Declaration of Access Easement, dated

1

December 23, 2005, recorded in said Bureau as Document No. 2005-262404; subject to the terms and provisions contained therein.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.    2. Document No. 2009-131370.

Together with non-exclusive easements for access and utility purposes as set forth in the following: (a) Grant of Non-Exclusive Access and Utility Easements, dated May 25, 2009, recorded in said Bureau as Document No. 2009-149017; (b) Grant of Non-Exclusive Access and Utility Easements (Hualalai Resort/Easement A), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149023; and (c) Grant of Non-Exclusive Roadway and Utility Easements (Kukio Frontage Road), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149029; all subject to the terms and conditions contained therein.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective September 26, 2007, recorded in said Bureau as Document No. 2007-172486.

-PARCEL THIRD:- (TMK No. (3) 7-2-031-027)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 35 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.131 acres, more or less.

Together with a non-exclusive easement for access purposes over Roadway Easements, as set forth and provided in Kaupulehu Lot 4-A Declaration of Access Easement, dated December 23, 2005, recorded in said Bureau as Document No. 2005-262404; subject to the terms and provisions contained therein.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.    2. Document No. 2009-131370.

Together with non-exclusive easements for access and utility purposes as set forth in the following: (a) Grant of Non-Exclusive Access and Utility Easements, dated May 25, 2009, recorded in said Bureau as Document No. 2009-149017; (b) Grant of Non-Exclusive Access and Utility Easements (Hualalai Resort/Easement A), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149023; and (c) Grant of Non-Exclusive Roadway and Utility Easements

2

(Kukio Frontage Road), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149029; all subject to the terms and conditions contained therein.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective April 30, 2007, recorded in said Bureau as Document No. 2007-077139.

-PARCEL FOURTH:- (TMK No. (3) 7-2-031-028)

All of that certain parcel of land situate at Kaupulehu, District of North Kona, Island and County of Hawaii, State of Hawaii, being LOT 36 of the “KAUPULEHU LOT 4-A, INCREMENT 1, PHASE 1 SUBDIVISION”, as shown on File Plan Number 2393, filed in the Bureau of Conveyances of the State of Hawaii, and containing an area of 1.109 acres, more or less.

Together with a non-exclusive easement for access purposes over Roadway Easements, as set forth and provided in Kaupulehu Lot 4-A Declaration of Access Easement, dated December 23, 2005, recorded in said Bureau as Document No. 2005-262404; subject to the terms and provisions contained therein.

Said Declaration was amended and/or supplemented by the following instruments:

1. Document No. 2007-170881.    2. Document No. 2009-131370.

Together with non-exclusive easements for access and utility purposes as set forth in the following: (a) Grant of Non-Exclusive Access and Utility Easements, dated May 25, 2009, recorded in said Bureau as Document No. 2009-149017; (b) Grant of Non-Exclusive Access and Utility Easements (Hualalai Resort/Easement A), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149023; and (c) Grant of Non-Exclusive Roadway and Utility Easements (Kukio Frontage Road), dated May 25, 2009, recorded in said Bureau as Document No. 2009-149029; all subject to the terms and conditions contained therein.

BEING THE PREMISES ACQUIRED BY KAUPULEHU LOT 4-A, INCREMENT I, PHASE I WARRANTY DEED WITH COVENANTS from WB KD ACQUISITION, LLC, a Delaware limited liability company, as Grantor, to KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, as Grantee, effective April 30, 2007, recorded in said Bureau as Document No. 2007-077140.

3

FIRST LOAN MODIFICATION AGREEMENT

THIS FIRST LOAN MODIFICATION AGREEMENT (this “Agreement”) is effective as of September 4, 2012 (the “Effective Date”),between KAUPULEHU 2007 LLLP, a Hawaii limited liability limited partnership, and BARNWELL INDUSTRIES, INC., a Delaware corporation (individually and collectively, the “Borrower”), and AMERICAN SAVINGS BANK, F.S.B., a federal savings bank (the “Lender”).

RECITALS:

A. Lender made a term loan to Borrower in the original principal amount of $12,500,000.00 (the “Loan”)pursuant to the Loan Agreement and Adjustable Rate Promissory Note both dated March 28, 2011 (the “Loan Agreement” and “Note”,respectively).

B. The Loan is secured and perfected by, among other things, the following documents in favor of Lender (collectively, the “Collateral Documents”):

1.    That certain Mortgage, Security Agreement, Assignment of Leases and Rents, Fixture Filing, and Financing Statement dated March 28, 2011, recorded in the Bureau of Conveyances of the State of Hawaii as Document No. 2011-051535.

2.    That certain unrecorded Security Agreement dated March 28, 2011, made by Borrower in favor of Lender.

3.    UCC Financing Statements recorded on March 30, 2011 in said Bureau as Document Nos. 2011-051536 and 2011-051537.

C. The payment and performance of the Loan is guaranteed on a limited basis by Terry Johnston, an individual (the “Guarantor”),pursuant to that certain Limited Guaranty dated March 28, 2011 (the “Guaranty”).

D. The Lender is the present holder of the Loan Agreement, Note and the Collateral Documents (collectively, the “Loan Documents”).

E. The Borrower has requested, and the Lender has agreed to modify and amend the terms of the Loan Documents in the manner hereinafter set forth.

AGREEMENT:

NOW, THEREFORE, in consideration of the Recitals set forth above, which are incorporated herein by reference, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Lender and Borrower agree as follows:

1.    Monthly Payments; Amortization Schedule. Beginning with the payment due on October 1, 2012, the amount of Borrower’s monthly principal and interest payment shall be

1

decreased to $58,280.00, such amount based on a 10-year amortization schedule (increased from the initial 7-year amortization schedule) which commenced on the closing date of the Loan.

2.    Balloon Payment. Borrower acknowledges and agrees that because the amortization period is now longer than the term of the Note, the monthly principal and interest payments are lower than the amount needed to pay the Loan in full by the Maturity Date. Accordingly, on the Maturity Date, Borrower may still owe some part of the principal balance due under the Note. A single payment, called a “balloon payment”, equal to the unpaid part of the principal, plus any interest and other charges then due, must be paid by Borrower on the Maturity Date. Lender will have no obligation to refinance the Loan at that time. Borrower will, therefore, be required to make payment out of other assets that Borrower may own, or Borrower will have to find a lender, which may be Lender or some other lender, willing to lend Borrower the money. If Borrower refinances the Loan at maturity, Borrower may have to pay some or all of the closing costs normally associated with a new loan, even if Borrower obtains refinancing from Lender.

3.    Other Agreements.

a.Borrower agrees that, as of the Effective Date, the total unpaid principal balance under the Note is $5,163,572.27.

b.Capitalized terms used, but not defined or otherwise specifically referenced in this Agreement shall have the meanings given to them in the Loan Agreement.

c.Nothing in this Agreement shall be construed or deemed to affect or jeopardize the Loan Agreement or the Loan Documents, nor to affect or jeopardize the liens or obligations created thereunder.

d.All references to “Note” and “Loan Agreement” contained in any of the Loan Documents shall hereafter mean the Note and the Loan Agreement, as modified by this Agreement.

e.Except as specifically amended hereby, all other terms, conditions and provisions contained in the Loan Documents shall remain in full force and effect and unchanged.

f.Borrower and Guarantor agree that there are no offsets or setoffs that may be asserted by the Borrower or Guarantor that may reduce any amounts outstanding under the Loan Documents arising prior to the date of this Agreement; that there are no defenses or counterclaims subsisting thereto; that all of the Loan Documents are valid and enforceable instruments which validly and properly secure the obligations of the Borrower under the Note; and that there is no act, event, or matter, or threatened act, event, or matter, which would prevent Lender or its successors and assigns, from effectively enforcing the Note, and from effectively enforcing or foreclosing on the various collateral securing the obligations of the Borrower under the Note and Loan Agreement. The Borrower and Guarantor further agree that, in consideration of Lender agreeing to modify and amend the Loan Agreement, Borrower and Guarantor hereby releases, acquits and discharges Lender from and against any and all claims, causes of action, demands, damages, liabilities and/or costs of any kind and nature whatsoever that Borrower and/

2

or Guarantor now have, have had at any time in the past, or may have at any time in the future (to the extent such future claims, causes of action, etc. arise out of events occurring on or before the execution of this Agreement), whether known or unknown as of the date hereof, pertaining to or in any way, directly or indirectly, related to the Loan, the Loan Agreement, the Note, any of the other Loan Documents, the Guaranty or this Agreement.

4.    Guarantor’s Consent. Guarantor hereby: (a) consents to the foregoing Agreement; (b) agrees that none of the foregoing shall affect or release the Guarantor from any of his obligations under the Guaranty; and (c) specifically acknowledges and confirms that the Guaranty shall apply to the Note, the Loan Agreement and the other Loan Documents as modified by this Agreement.

5.    Counterparts. The parties hereto agree that this Agreement may be executed in counterparts and by facsimile signatures, each of which shall be deemed an original, and said counterparts shall together constitute one and the same agreement, binding all of the parties hereto, notwithstanding all of the parties are not signatory to the original or same counterparts. For all purposes, duplicate unexecuted and unacknowledged pages of the counterparts may be discarded and the remaining pages assembled as one document.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

3

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

KAUPULEHU 2007 LLLP,		AMERICAN SAVINGS BANK, F.S.B.,
a Hawaii limited liability limited partnership		a federal savings bank
By	BARNWELL MAKAI, INC.,	By:	/s/ Alvin Takahashi
	a Hawaii corporation		Name: Alvin Takahashi
	Its General Partner		Title: Vice President
By:	/s/ Alexander C. Kinzler	By:	/s/ Dean Hirabayashi
	ALEXANDER C. KINZLER		Name: Dean Hirabayashi
	Its President		Title: Senior Vice President
			Lender

By:	/s/ Russell M. Gifford
	RUSSELL M. GIFFORD
	Its Vice President

BARNWELL INDUSTRIES, INC.,
By:	/s/ Alexander C. Kinzler
	ALEXANDER C. KINZLER
	Its President

By:	/s/ Russell M. Gifford
	RUSSELL M. GIFFORD
	Its Vice President
	Borrower

4

/s/ Terry Johnston
TERRY JOHNSTON
	Guarantor

5

EX-31.1

Exhibit No. 31.1

Certifications

I, Russell M. Gifford, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Barnwell Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;    

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 13, 2015	/s/ Russell M. Gifford
		Russell M. Gifford
		Chief Financial Officer

EX-31.2

Exhibit No. 31.2

Certifications

I, Morton H. Kinzler, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Barnwell Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;    

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	May 13, 2015	/s/ Morton H. Kinzler
		Morton H. Kinzler
		Chief Executive Officer

EX-32

Exhibit No. 32

Barnwell Industries, Inc.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Barnwell Industries, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2015 as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated:	May 13, 2015	/s/ Morton H. Kinzler
		Name: Morton H. Kinzler
		Title: Chief Executive Officer
Dated:	May 13, 2015	/s/ Russell M. Gifford
		Name: Russell M. Gifford
		Title: Chief Financial Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

A signed original of the written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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LOSS PER COMMON SHARE (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Net Loss (Numerator)
Basic	$ (2,017)	$ (285)	$ (2,484)	$ (1,274)
Effect of dilutive securities - common stock options	0	0	0	0
Diluted	$ (2,017)	$ (285)	$ (2,484)	$ (1,274)
Shares (Denominator)
Basic (in shares)	8,277,160	8,277,160	8,277,160	8,277,160
Effect of dilutive securities - common stock options	0	0	0	0
Diluted (in shares)	8,277,160	8,277,160	8,277,160	8,277,160
Per-Share Amount
Basic net loss per share (in dollars per share)	$ (0.24)	$ (0.03)	$ (0.30)	$ (0.15)
Diluted net loss per share (in dollars per share)	$ (0.24)	$ (0.03)	$ (0.30)	$ (0.15)
Options
Antidilutive shares of common stock excluded from the computation of diluted shares
Antidilutive shares excluded from computation of loss per share (in shares)		621,250		837,250

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RELATED PARTY TRANSACTIONS (Details) (Kaupulehu Developments, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Related party transactions
Percentage of sales payment received	$ 950	$ 0	$ 2,150	$ 140
KD Kaupulehu, LLLP | Investment in land development partnerships
Related party transactions
Ownership interest acquired (as a percent)	19.60%		19.60%
Percentage of sales payment received			$ 2,150
KD Kaupulehu, LLLP | Investment in land development partnerships | Phase I
Related party transactions
Number of lots sold in Increment I			6
KD Kaupulehu, LLLP | Investment in land development partnerships | Phase II
Related party transactions
Number of lots sold in Increment I			5

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RETIREMENT PLANS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Pension Plan
Net periodic benefit cost:
Service cost	$ 77	$ 59	$ 128	$ 118
Interest cost	91	84	178	169
Expected return on plan assets	(125)	(105)	(250)	(210)
Amortization of prior service cost (credit)	2	2	3	3
Amortization of net actuarial loss (gain)	22	9	43	18
Net periodic benefit cost	67	49	102	98
Other disclosures
Contribution by the entity to the Pension Plan			250
SERP
Net periodic benefit cost:
Service cost	16	11	31	23
Interest cost	20	17	38	33
Amortization of prior service cost (credit)	(1)	(2)	(2)	(3)
Amortization of net actuarial loss (gain)	6	1	12	2
Net periodic benefit cost	41	27	79	55
Postretirement Medical
Net periodic benefit cost:
Service cost	0	3	0	6
Interest cost	13	14	26	27
Amortization of prior service cost (credit)	0	3	0	6
Amortization of net actuarial loss (gain)	(2)	(5)	(3)	(10)
Net periodic benefit cost	$ 11	$ 15	$ 23	$ 29

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SUBSEQUENT EVENT (Details) (Kaupulehu Developments, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		1 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Apr. 30, 2015 lot
Subsequent events
Percentage of sales payment received	$ 950	$ 0	$ 2,150	$ 140
Subsequent event | Investment in land development partnerships | Phase II
Subsequent events
Percentage of sales payment received					$ 643
Number of lots sold in Increment I					2

XML

ACQUISITION OF OIL AND NATURAL GAS PROPERTIES (Detail) (Oil and natural gas properties, Progress area of Alberta, USD $) In Thousands, unless otherwise specified	0 Months Ended
	Nov. 13, 2014	Nov. 13, 2014
Oil and natural gas properties | Progress area of Alberta
Oil and natural gas properties
Purchase or sales price	$ 526	$ 526
Period after closing of agreement for final determination of the customary adjustments to the purchase price	180 days
Allocation of the purchase price to the assets acquired and liabilities assumed
Property and equipment	751	751
Asset retirement obligation	(225)	(225)
Net identifiable assets acquired	$ 526	$ 526

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INCOME TAXES (Tables)

6 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

Components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests

The components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests, are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
United States	$	(179,000	)	$	(1,389,000	)	$	(415,000	)	$	(2,239,000	)
Canada	(1,449,000		)	1,617,000			(1,769,000		)	1,416,000
	$	(1,628,000	)	$	228,000		$	(2,184,000	)	$	(823,000	)

Schedule of components of the income tax provision (benefit)

The components of the income tax provision (benefit) are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Current	$	(350,000	)	$	672,000		$	(347,000	)	$	543,000
Deferred	739,000			(159,000		)	647,000			(92,000		)
	$	389,000		$	513,000		$	300,000		$	451,000

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RELATED PARTY TRANSACTIONS

6 Months Ended

Mar. 31, 2015

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Kaupulehu Developments is entitled to receive a percentage of the gross receipts from the sales of single-family residential lots in Increment I from KD I, a land development partnership in which Barnwell holds a 19.6% non-controlling ownership interest accounted for under the equity method of investment. The percentage payments are part of a 2004 transaction where Kaupulehu Developments sold its leasehold interest in Increment I, which was prior to Barnwell’s affiliation with KD I which commenced on November 27, 2013, the acquisition date of our ownership interest in the Kukio Resort land development partnerships.

During the six months ended March 31, 2015, Barnwell received $2,150,000 in percentage of sales payments from KD I from the sale of six contiguous lots within Phase I of Increment I to a single buyer and five lots within Phase II of Increment I. The lot sale during the six months ended March 31, 2014 occurred prior to our purchase of ownership interests in the Kukio Resort land development partnerships.

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SEGMENT INFORMATION (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Revenues:
Revenues	$ 3,476	$ 7,827	$ 9,491	$ 15,024
Interest income	16	6	33	10
Total revenues	3,492	7,833	9,524	15,034
Depletion, depreciation, and amortization:
Depletion, depreciation, and amortization	868	1,904	1,847	4,068
Operating profit (before general and administrative expenses):
Operating profit	318	2,792	2,206	3,892
Equity in loss of affiliates:
Equity in income (loss) of affiliates	368	(116)	456	(263)
General and administrative expenses	(2,104)	(2,301)	(4,379)	(4,157)
Interest expense	(82)	(192)	(172)	(355)
Interest income	16	6	33	10
(Loss) income before income taxes	(1,484)	189	(1,856)	(873)
Oil and natural gas
Revenues:
Revenues	2,092	6,397	5,064	11,724
Depletion, depreciation, and amortization:
Depletion, depreciation, and amortization	772	1,797	1,655	3,856
Operating profit (before general and administrative expenses):
Operating profit	(498)	2,558	(32)	3,205
Land investment
Revenues:
Revenues	817	0	1,849	120
Operating profit (before general and administrative expenses):
Operating profit	817	0	1,849	120
Contract drilling
Revenues:
Revenues	491	1,318	2,424	2,927
Depletion, depreciation, and amortization:
Depletion, depreciation, and amortization	70	78	141	156
Operating profit (before general and administrative expenses):
Operating profit	(51)	151	286	370
Other
Revenues:
Revenues	76	112	154	253
Depletion, depreciation, and amortization:
Depletion, depreciation, and amortization	26	29	51	56
Operating profit (before general and administrative expenses):
Operating profit	$ 50	$ 83	$ 103	$ 197

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INVESTMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Nov. 27, 2013 partnership	Oct. 31, 2014
Investment Holdings [Line Items]
Land investment	$ 368	$ (116)	$ 456	$ (263)
Investment in land
Investment Holdings [Line Items]
Number of residential parcels owned	1		1
Purchase or sales price						1,250
Investment in land development partnerships
Investment Holdings [Line Items]
Number of limited liability limited partnerships formed					2
Basis difference between the underlying equity in net assets of the investee and the carrying value of the entity's investment	315		315
Bonds issued by the surety	4,830		4,830
Maximum loss exposure	9,944		9,944
Investment in land development partnerships | KD Kukio Resorts, LLLP, KD Maniniowali, LLLP, and KD Kaupulehu, LLLP
Investment Holdings [Line Items]
Ownership interest acquired, aggregate cost					5,140
Investment in land development partnerships | KD Kukio Resorts, LLLP
Investment Holdings [Line Items]
Ownership interest acquired (as a percent)					19.60%
Investment in land development partnerships | KD Maniniowali, LLLP
Investment Holdings [Line Items]
Ownership interest acquired (as a percent)					19.60%
Investment in land development partnerships | KD Kaupulehu, LLLP
Investment Holdings [Line Items]
Ownership interest acquired (as a percent)					19.60%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	3 Months Ended	1 Months Ended
	Mar. 31, 2015 venture	Oct. 31, 2014 parcel
Principles of Consolidation
Number of 80%-owned joint ventures	2
Investment in land
Note Receivable
Number of residential parcels sold		1
Allowance for note receivable	0
Kaupulehu Developments
Principles of Consolidation
Ownership interest in subsidiaries (as a percent)	77.60%
KD Kona 2013 LLLP
Principles of Consolidation
Ownership interest in subsidiaries (as a percent)	75.00%
Kaupulehu 2007, LLLP
Principles of Consolidation
Ownership interest in subsidiaries (as a percent)	80.00%
Kaupulehu Investors, LLC
Principles of Consolidation
Ownership interest in subsidiaries (as a percent)	80.00%

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COMMITMENTS AND CONTINGENCIES (Detail) (USD $)	3 Months Ended	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2015	Sep. 30, 2014
Commitments and Contingencies Disclosure [Abstract]
Estimate of probable loss	$ 2,300,000	$ 2,300,000
Percentage of working interest	58.00%	58.00%
Accounts Receivable, Recoveries from Minority Working Interest	894,000	894,000
Insurance deductible	80,000	80,000
Estimated recovery from insurance	1,156,000	1,156,000
Environmental Remediation Expense	160,000	160,000
Loss contingency accrual	1,349,000	1,349,000
Accrual for environmental remediation costs	$ 401,000	$ 401,000	$ 501,000

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LONG-TERM DEBT (Details)			1 Months Ended				1 Months Ended	3 Months Ended	6 Months Ended		6 Months Ended									1 Months Ended
	Mar. 31, 2015 USD ($)	Sep. 30, 2014 USD ($)	Oct. 31, 2014 Investment in land parcel	Mar. 31, 2015 Canadian revolving credit facility USD ($)	Sep. 30, 2014 Canadian revolving credit facility USD ($)	Mar. 31, 2015 Canadian revolving credit facility Subsequent event CAD	Feb. 28, 2015 Canadian revolving credit facility Credit Agreement USD ($)	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement USD ($)	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement USD ($)	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement Subsequent event CAD	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement London Interbank Offered Rate (LIBOR)	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement Base Rate	Mar. 31, 2015 Canadian revolving credit facility Credit Agreement Prime Rate	Apr. 30, 2015 Amended Canadian revolving credit facility Subsequent event USD ($)	Apr. 30, 2015 Amended Canadian revolving credit facility Subsequent event CAD	Apr. 10, 2015 Amended Canadian revolving credit facility Credit Agreement Subsequent event USD ($)	Apr. 10, 2015 Amended Canadian revolving credit facility Credit Agreement Subsequent event CAD	Mar. 31, 2015 Real estate loan USD ($)	Sep. 30, 2014 Real estate loan USD ($)	Oct. 31, 2014 Real estate loan Investment in land USD ($) parcel	Apr. 01, 2015 Real estate loan Subsequent event
Long-term debt
Long-term debt	$ 8,654,000	$ 11,099,000		$ 5,000,000	$ 7,000,000			$ 5,000,000	$ 5,000,000									$ 3,654,000	$ 4,099,000
Less: current portion	(3,654,000)	(4,449,000)
Total long-term debt	5,000,000	6,650,000
Long-term debt, additional disclosures
Maximum borrowing capacity						11,800,000				11,800,000				5,125,000	6,500,000	5,125,000	6,500,000
Repayments of lines of credit							2,000,000
Foreign currency transaction loss									146,000
Interest rate on the facility (as a percent)								2.67%	2.67%
Basis spread on variable rate (as a percent)											2.50%	1.50%	1.50%
Standby fee (as a percent)									0.625%
Renewal period with no required debt repayments								1 year
Period of term loan if credit facility term date is not extended								2 years
Interest rate (as a percent)																		3.41%			3.59%
Number of residential parcels sold			1																	1
Debt repaid as a result of the sale of one of the residential parcels																				$ 266,000
Repayment schedule if the facility is converted to a two-year term loan
Percentage of outstanding loan balance to be repaid in first year of the term period								20.00%
Percentage of outstanding loan balance to be repaid per quarter in first year of the term period								5.00%
Percentage of outstanding loan balance to be repaid in second year of the term period								80.00%
Percentage of outstanding loan balance to be repaid per quarter for first three quarters in second year of the term period								5.00%
Percentage of outstanding loan balance to be repaid in the final quarter of the second year of the term period								65.00%

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Statement of Stockholders' Equity [Abstract]
Income taxes	$ 0	$ 0	$ 0	$ 0
Amortization of accumulated other comprehensive loss into net periodic benefit cost, taxes	$ 0	$ 0	$ 0	$ 0

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INVESTMENTS - SUMMARY OF INVESTMENTS (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Investment Holdings [Line Items]
Investments	$ 6,356	$ 5,900
Residential Parcel
Investment Holdings [Line Items]
Investments	1,192	1,192
Investment in land development partnerships
Investment Holdings [Line Items]
Investments	5,114	4,658
Investment in leasehold land interest - Lot 4C
Investment Holdings [Line Items]
Investments	$ 50	$ 50

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INVESTMENTS (Tables)

6 Months Ended

Mar. 31, 2015

Investments, All Other Investments [Abstract]

Summary of investments

A summary of Barnwell’s investments is as follows:

	March 31, 2015		September 30, 2014
Investment in residential parcel	$	1,192,000	$	1,192,000
Investment in land development partnerships	5,114,000		4,658,000
Investment in leasehold land interest – Lot 4C	50,000		50,000
Total investments	$	6,356,000	$	5,900,000

Summarized financial information for the land development partnerships

Summarized financial information for the Kukio Resort land development partnerships is as follows:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Revenue	$	6,081,000	$	1,353,000
Gross profit	$	2,982,000	$	545,000
Net earnings (loss)	$	2,143,000	$	(428,000	)

	Six months ended March 31, 2015		November 27, 2013 - March 31, 2014
Revenue	$	10,707,000	$	1,622,000
Gross profit	$	4,409,000	$	653,000
Net earnings (loss)	$	2,563,000	$	(809,000	)

Kaupulehu Developments

INVESTMENTS

Summary of Increment I percentage of sales payment revenues received

The following table summarizes the Increment I percentage of sales payment revenues received from KD I.

	Three months ended   March 31,					Six months ended   March 31,
	2015			2014		2015			2014
Sale of interest in leasehold land:
Proceeds	$	950,000		$	—	$	2,150,000		$	140,000
Fees	(133,000		)	—		(301,000		)	(20,000		)
Revenues – sale of interest in leasehold land, net	$	817,000		$	—	$	1,849,000		$	120,000

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LOSS PER COMMON SHARE (Tables)

6 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Reconciliations between net loss attributable to the entity's stockholders and common shares outstanding of the basic and diluted net loss per share computations

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

	Three months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)

	Six months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)

	Three months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(285,000	)	8,277,160	$	(0.03	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(285,000	)	8,277,160	$	(0.03	)

	Six months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)

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INVESTMENTS - LAND DEVELOPMENT PARTNERSHIPS (Details) (Investment in land development partnerships, USD $) In Thousands, unless otherwise specified	3 Months Ended		4 Months Ended	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2014	Mar. 31, 2015
Investment in land development partnerships
Investment Holdings [Line Items]
Revenue	$ 6,081	$ 1,353	$ 1,622	$ 10,707
Gross profit	2,982	545	653	4,409
Net earnings (loss)	$ 2,143	$ (428)	$ (809)	$ 2,563

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ACQUISITION OF OIL AND NATURAL GAS PROPERTIES (Tables)

6 Months Ended

Mar. 31, 2015

Extractive Industries [Abstract]

Summary of allocation of purchase price to the assets acquired and liabilities assumed

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 13 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

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LONG-TERM DEBT (Tables)

6 Months Ended

Mar. 31, 2015

Long-term Debt, Unclassified [Abstract]

Schedule of long-term debt

A summary of Barnwell’s long-term debt is as follows:

	March 31, 2015			September 30, 2014
Canadian revolving credit facility	$	5,000,000		$	7,000,000
Real estate loan	3,654,000			4,099,000
	8,654,000			11,099,000
Less: current portion	(3,654,000		)	(4,449,000		)
Total long-term debt	$	5,000,000		$	6,650,000

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CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock	Non-controlling Interests
Balance, beginning of period at Dec. 31, 2013	$ 20,614	$ 4,223	$ 1,291	$ 14,543	$ 2,219	$ (2,286)	$ 624
Balance, beginning of period (in shares) at Dec. 31, 2013		8,277,160
Increase (Decrease) in Stockholders' Equity
Contributions from non-controlling interests	16						16
Net (loss) income	(324)			(285)			(39)
Share-based compensation	8		8
Foreign currency translation adjustments, net of taxes of $0	(921)				(921)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	8				8
Balance, end of period at Mar. 31, 2014	19,401	4,223	1,299	14,258	1,306	(2,286)	601
Balance, end of period (in shares) at Mar. 31, 2014		8,277,160
Balance, beginning of period at Sep. 30, 2013	22,320	4,223	1,289	15,532	2,991	(2,286)	571
Balance, beginning of period (in shares) at Sep. 30, 2013		8,277,160
Increase (Decrease) in Stockholders' Equity
Contributions from non-controlling interests	80
Net (loss) income	(1,324)			(1,274)			(50)
Share-based compensation	10		10
Foreign currency translation adjustments, net of taxes of $0	(1,701)				(1,701)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	16				16
Balance, end of period at Mar. 31, 2014	19,401	4,223	1,299	14,258	1,306	(2,286)	601
Balance, end of period (in shares) at Mar. 31, 2014		8,277,160
Balance, beginning of period at Sep. 30, 2014	19,945	4,223	1,315	16,204	(258)	(2,286)	747
Balance, beginning of period (in shares) at Sep. 30, 2014		8,277,160
Increase (Decrease) in Stockholders' Equity
Contributions from non-controlling interests	90						90
Distributions to non-controlling interests	(334)						(334)
Net (loss) income	(2,156)			(2,484)			328
Share-based compensation	11		11
Foreign currency translation adjustments, net of taxes of $0	(1,179)				(1,179)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	53				53
Balance, end of period at Mar. 31, 2015	16,430	4,223	1,326	13,720	(1,384)	(2,286)	831
Balance, end of period (in shares) at Mar. 31, 2015		8,277,160
Balance, beginning of period at Dec. 31, 2014	19,122	4,223	1,322	15,737	(639)	(2,286)	765
Balance, beginning of period (in shares) at Dec. 31, 2014		8,277,160
Increase (Decrease) in Stockholders' Equity
Contributions from non-controlling interests	45						45
Distributions to non-controlling interests	(123)						(123)
Net (loss) income	(1,873)			(2,017)			144
Share-based compensation	4		4
Foreign currency translation adjustments, net of taxes of $0	(772)				(772)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	27				27
Balance, end of period at Mar. 31, 2015	$ 16,430	$ 4,223	$ 1,326	$ 13,720	$ (1,384)		$ 831
Balance, end of period (in shares) at Mar. 31, 2015		8,277,160

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RETIREMENT PLANS (Tables)

6 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Schedule of components of net periodic benefit cost

The following table details the components of net periodic benefit cost for Barnwell’s retirement plans:

	Pension Plan						SERP						Postretirement Medical
	Three months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	77,000		$	59,000		$	16,000		$	11,000		$	—		$	3,000
Interest cost	91,000			84,000			20,000			17,000			13,000			14,000
Expected return on plan assets	(125,000		)	(105,000		)	—			—			—			—
Amortization of prior service cost (credit)	2,000			2,000			(1,000		)	(2,000		)	—			3,000
Amortization of net actuarial loss (gain)	22,000			9,000			6,000			1,000			(2,000		)	(5,000		)
Net periodic benefit cost	$	67,000		$	49,000		$	41,000		$	27,000		$	11,000		$	15,000

	Pension Plan						SERP						Postretirement Medical
	Six months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	128,000		$	118,000		$	31,000		$	23,000		$	—		$	6,000
Interest cost	178,000			169,000			38,000			33,000			26,000			27,000
Expected return on plan assets	(250,000		)	(210,000		)	—			—			—			—
Amortization of prior service cost (credit)	3,000			3,000			(2,000		)	(3,000		)	—			6,000
Amortization of net actuarial loss (gain)	43,000			18,000			12,000			2,000			(3,000		)	(10,000		)
Net periodic benefit cost	$	102,000		$	98,000		$	79,000		$	55,000		$	23,000		$	29,000

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NOTE RECEIVABLE (Details) (Investment in land, USD $) In Thousands, unless otherwise specified	1 Months Ended
	Oct. 31, 2014 parcel
Investment in land
Note receivable
Number of residential parcels sold	1
Purchase or sales price	$ 1,250
Cash proceeds received	$ 343
Period after purchase closing date mortgage is due	270 days

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INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Supplemental disclosure of cash flow information:
Interest	$ 164	$ 324
Income taxes paid	0	123
Supplemental disclosure of non-cash investing and financing activities:
Note receivable for sale of investment	907	0
Oil and natural gas
Supplemental disclosures of cash flow information:
Increase (Decrease) in capital expenditure accruals related to oil and natural gas exploration and development	295	(497)
Increase (Decrease) in capital expenditure accruals related to oil and natural gas asset retirement obligations	$ 938	$ 58

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Current assets:
Cash and cash equivalents	$ 9,097	$ 16,104
Accounts and other receivables, net of allowance for doubtful accounts of: $28,000 at March 31, 2015; $34,000 at September 30, 2014	4,026	2,910
Note receivable	899	0
Prepaid expenses	486	221
Investment held for sale	0	1,139
Real estate held for sale	5,448	5,448
Other current assets	824	698
Total current assets	20,780	26,520
Investments	6,356	5,900
Property and equipment	200,660	223,023
Accumulated depletion, depreciation, and amortization	(179,877)	(200,673)
Property and equipment, net	20,783	22,350
Total assets	47,919	54,770
Current liabilities:
Accounts payable	3,532	3,453
Accrued operating and other expenses	2,371	2,464
Accrued incentive and other compensation	572	1,085
Current portion of long-term debt	3,654	4,449
Other current liabilities	2,444	3,072
Total current liabilities	12,573	14,523
Long-term debt	5,000	6,650
Liability for retirement benefits	4,164	4,266
Asset retirement obligation	8,012	8,185
Deferred income taxes	1,740	1,201
Total liabilities	31,489	34,825
Commitments and contingencies (Note 14)
Equity:
Common stock, par value $0.50 per share; authorized, 20,000,000 shares: 8,445,060 issued at March 31, 2015 and September 30, 2014	4,223	4,223
Additional paid-in capital	1,326	1,315
Retained earnings	13,720	16,204
Accumulated other comprehensive loss, net	(1,384)	(258)
Treasury stock, at cost: 167,900 shares at March 31, 2015 and September 30, 2014	(2,286)	(2,286)
Total stockholders' equity	15,599	19,198
Non-controlling interests	831	747
Total equity	16,430	19,945
Total liabilities and equity	$ 47,919	$ 54,770

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INVESTMENTS - PERCENTAGE OF SALES PAYMENTS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Investment Holdings [Line Items]
Sale of interest in leasehold land, net	$ 817	$ 0	$ 1,849	$ 120
Kaupulehu Developments
Investment Holdings [Line Items]
Proceeds from Sale of Interest in Leasehold Land Gross	950	0	2,150	140
Fees Related to Sale of Interest in Leasehold Land	(133)	0	(301)	(20)
Sale of interest in leasehold land, net	$ 817	$ 0	$ 1,849	$ 120
Area of land (in acres)	870		870
Number of development increments	2
Land Interest
Investment Holdings [Line Items]
Area of land (in acres)	1,000		1,000

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
Income taxes	$ 0	$ 0	$ 0	$ 0
Amortization of accumulated other comprehensive loss into net periodic benefit cost, taxes	$ 0	$ 0	$ 0	$ 0

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ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (Tables)

6 Months Ended

Mar. 31, 2015

Equity [Abstract]

Schedule of changes in each component of accumulated other comprehensive (loss) income

The changes in each component of accumulated other comprehensive (loss) income were as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Foreign currency translation:
Beginning accumulated foreign currency translation	$	1,285,000		$	2,921,000		$	1,692,000		$	3,701,000
Change in cumulative translation adjustment before reclassifications	(918,000		)	(873,000		)	(1,325,000		)	(1,653,000		)
Amounts reclassified from accumulated other comprehensive income	146,000			(48,000		)	146,000			(48,000		)
Income taxes	—			—			—			—
Net current period other comprehensive loss	(772,000		)	(921,000		)	(1,179,000		)	(1,701,000		)
Ending accumulated foreign currency translation	513,000			2,000,000			513,000			2,000,000
Retirement plans:
Beginning accumulated retirement plans benefit cost	(1,924,000		)	(702,000		)	(1,950,000		)	(710,000		)
Amortization of net actuarial loss and prior service cost	27,000			8,000			53,000			16,000
Income taxes	—			—			—			—
Net current period other comprehensive income	27,000			8,000			53,000			16,000
Ending accumulated retirement plans benefit cost	(1,897,000		)	(694,000		)	(1,897,000		)	(694,000		)
Accumulated other comprehensive (loss) income, net of taxes	$	(1,384,000	)	$	1,306,000		$	(1,384,000	)	$	1,306,000

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FAIR VALUE MEASUREMENTS

6 Months Ended

Mar. 31, 2015

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The carrying values of cash and cash equivalents, accounts and other receivables, accounts payable and accrued current liabilities approximate their fair values due to the short-term nature of the instruments. The carrying value of the note receivable approximates fair value as it has been recorded at a discount using an interest rate based on market rates for similar instruments. The carrying value of long-term debt approximates fair value as the terms approximate current market terms for similar debt instruments of comparable risk and maturities.

The estimated fair values of oil and natural gas properties and the asset retirement obligation assumed in the acquisition of additional non-operated working interests located in the Progress area of Alberta, Canada, are based on an estimated discounted cash flow model and market assumptions. The significant Level 3 assumptions used in the calculation of estimated discounted cash flows included future commodity prices, projections of estimated quantities of oil and natural gas reserves, expectations for timing and amount of future development, operating and asset retirement costs, projections of future rates of production, expected recovery rates and risk adjusted discount rates.

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INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Tables)

6 Months Ended

Mar. 31, 2015

Supplemental Cash Flow Elements [Abstract]

Schedule of supplemental cash flow information

	Six months ended   March 31,
	2015		2014
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	164,000	$	324,000
Income taxes paid	$	—	$	123,000
Supplemental disclosure of non-cash investing and financing activities:
Note receivable for sale of investment	$	907,000	$	—

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INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

6 Months Ended

Mar. 31, 2015

Supplemental Cash Flow Elements [Abstract]

INFORMATION RELATING TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS

INFORMATION RELATING TO THE CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended   March 31,
	2015		2014
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest	$	164,000	$	324,000
Income taxes paid	$	—	$	123,000
Supplemental disclosure of non-cash investing and financing activities:
Note receivable for sale of investment	$	907,000	$	—

Capital expenditure accruals related to oil and natural gas exploration and development increased $295,000 and decreased $497,000 during the six months ended March 31, 2015 and 2014, respectively. Additionally, capital expenditure accruals related to oil and natural gas asset retirement obligations increased $938,000 and $58,000 during the six months ended March 31, 2015 and 2014, respectively.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities:
Net loss	$ (2,156)	$ (1,324)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Equity in (income) loss of affiliates	(456)	263
Depletion, depreciation, and amortization	1,847	4,068
Foreign exchange loss (gain)	146	(48)
Loss on sale of investment	16	0
Retirement benefits expense	204	182
Accretion of asset retirement obligation	308	238
Deferred income tax expense (benefit)	647	(92)
Asset retirement obligation payments	(489)	(70)
Share-based compensation benefit	(47)	(190)
Retirement plan contributions	(253)	(3)
Sale of interest in leasehold land, net	(1,849)	(120)
(Decrease) increase from changes in current assets and liabilities	(2,361)	106
Net cash (used in) provided by operating activities	(4,443)	3,010
Cash flows from investing activities:
Proceeds from sale of interest in leasehold land, net of fees paid	1,849	120
Proceeds from sale of investment, net of closing costs	266	0
Proceeds from sale of oil and natural gas assets	0	2,828
Proceeds from gas over bitumen royalty adjustments	0	8
Payment to acquire oil and natural gas properties	(526)	0
Payment to acquire interest in affiliates	0	(5,140)
Capital expenditures - oil and natural gas	(564)	(2,700)
Capital expenditures - all other	(75)	(38)
Net cash provided by (used in) investing activities	950	(4,922)
Cash flows from financing activities:
Proceeds from long-term debt borrowings	0	5,000
Repayments of long-term debt	(2,445)	(1,770)
Increase in restricted cash	0	(1,947)
Contributions from non-controlling interests	90	80
Distributions to non-controlling interests	(334)	0
Net cash (used in) provided by financing activities	(2,689)	1,363
Effect of exchange rate changes on cash and cash equivalents	(825)	(116)
Net decrease in cash and cash equivalents	(7,007)	(665)
Cash and cash equivalents at beginning of period	16,104	7,828
Cash and cash equivalents at end of period	$ 9,097	$ 7,163

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2015	Sep. 30, 2014
Statement of Financial Position [Abstract]
Accounts receivable, allowance for doubtful accounts	$ 28	$ 34
Common stock, par value (in dollars per share)	$ 0.50	$ 0.50
Common stock, authorized shares	20,000,000	20,000,000
Common stock, issued shares	8,445,060	8,445,060
Treasury stock, shares	167,900	167,900

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LONG-TERM DEBT

6 Months Ended

Mar. 31, 2015

Long-term Debt, Unclassified [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

A summary of Barnwell’s long-term debt is as follows:

	March 31, 2015			September 30, 2014
Canadian revolving credit facility	$	5,000,000		$	7,000,000
Real estate loan	3,654,000			4,099,000
	8,654,000			11,099,000
Less: current portion	(3,654,000		)	(4,449,000		)
Total long-term debt	$	5,000,000		$	6,650,000

Canadian revolving credit facility

On April 10, 2015, Barnwell’s credit facility at Royal Bank of Canada was amended and renewed. The amendment, among other things, provides for a decrease in the aggregate principal amount of the revolving credit facility to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate, from $11,800,000 Canadian dollars. This reduction in the borrowing capacity is largely due to significant declines in the bank’s forecast of oil and natural gas prices. The other material terms of the credit facility remain unchanged.

The obligations under the credit facility are secured by substantially all of the assets of Barnwell of Canada, Limited. The credit facility subjects Barnwell to certain customary affirmative covenants, including the delivery of financial statements and annual appraisals of certain oil and gas properties. In addition, the credit facility contains customary negative covenants, including, but not limited to, restrictions on the ability of Barnwell to, among other things, merge with or acquire other entities, incur new liens, incur additional indebtedness, or sell certain oil and gas properties or petroleum and natural gas reserves (other than the sale of production from such oil and gas properties in the ordinary course of business). The credit facility also contains provisions concerning customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, and certain events of bankruptcy and insolvency. If an event of default occurs and is continuing, amounts due under the credit facility may be accelerated, and the rights and remedies of Royal Bank of Canada under the credit facility may be exercised, including rights with respect to the collateral securing Barnwell’s obligations thereunder.

In February 2015, Barnwell repaid $2,000,000 of the credit facility. During the three and six months ended March 31, 2015, Barnwell realized a foreign currency transaction loss of $146,000 as a result of the repayment of U.S. dollar denominated debt using Canadian dollars. Borrowings under this facility were US$5,000,000 at March 31, 2015. The interest rate on the facility at March 31, 2015 was 2.67%.

The renewed facility is available in U.S. dollars at the London Interbank Offer Rate plus 2.50%, at Royal Bank of Canada’s U.S. base rate plus 1.50%, or in Canadian dollars at Royal Bank of Canada’s prime rate plus 1.50%. A standby fee of 0.625% per annum is charged on the unused facility balance. Under the financing agreement with Royal Bank of Canada, the facility is reviewed annually, with the next review planned for April 2016. Subject to that review, the facility may be renewed for one year with no required debt repayments or converted to a two-year term loan by the bank. If the facility is converted to a two-year term loan, Barnwell has agreed to the following repayment schedule of the then outstanding loan balance: first year of the term period - 20% (5% per quarter), and in the second year of the term period - 80% (5% per quarter for the first three quarters and 65% in the final quarter). Based on the terms of this agreement, if Royal Bank of Canada were to convert the facility to a two-year term loan upon its next review in April 2016, Barnwell would be obligated to make quarterly principal and interest repayments beginning in July 2016. As no debt repayments will be required on or before March 31, 2016, the entire outstanding loan balance at March 31, 2015 is classified as long-term debt.

Real estate loan

Barnwell, together with its real estate joint venture, Kaupulehu 2007, has a non-revolving real estate loan with a Hawaii bank. In January 2015, the loan was amended from monthly principal and interest payments to monthly interest-only payments effective February 1, 2015. All other terms of the loan remained unchanged. The principal balance and any accrued interest will be due and payable on April 1, 2018. The interest rate adjusts each April for the remaining term of the loan to the lender’s then prevailing interest rate for similarly priced commercial mortgage loans or a floating rate equal to the lender’s base rate. The interest rate at March 31, 2015 was 3.41% and was adjusted to 3.59% effective April 1, 2015.

The loan is collateralized by, among other things, a first mortgage on Kaupulehu 2007’s lots together with all improvements thereon. Kaupulehu 2007 will be required to make a principal payment upon the sale of the house or the residential parcel in the amount of the net sales proceeds of the house or residential parcel; the loan agreement defines net sales proceeds as the gross sales proceeds for the house or residential parcel, less reasonable commissions and normal closing costs.

As a result of the sale of one of the residential parcels in October 2014, Kaupulehu 2007 repaid $266,000 of the real estate loan, as required from the net proceeds of the sale, in addition to the scheduled monthly payments. Barnwell is required to remit the remaining net sales proceeds upon collection of the note receivable related to the sale of the residential parcel in July 2015.

The loan agreement contains provisions requiring us to maintain compliance with certain covenants including a consolidated debt service coverage ratio and a consolidated total liabilities to tangible net worth ratio. At March 31, 2015, the Company was in violation as a result of exceeding the maximum consolidated total liabilities to tangible net worth ratio. The Company obtained a waiver from the bank for non-compliance with the covenant.

The home collateralizing the loan is currently available for sale; therefore, the entire balance outstanding at March 31, 2015 under the term loan has been classified as a current liability.

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Document and Entity Information	6 Months Ended
	Mar. 31, 2015	May 11, 2015
Document and Entity Information
Entity Registrant Name	BARNWELL INDUSTRIES INC
Entity Central Index Key	0000010048
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		8,277,160
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2

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RETIREMENT PLANS

6 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

RETIREMENT PLANS

RETIREMENT PLANS

Barnwell sponsors a noncontributory defined benefit pension plan (“Pension Plan”) covering substantially all of its U.S. employees. Additionally, Barnwell sponsors a Supplemental Employee Retirement Plan (“SERP”), a noncontributory supplemental retirement benefit plan which covers certain current and former employees of Barnwell for amounts exceeding the limits allowed under the Pension Plan, and a postretirement medical insurance benefits plan (“Postretirement Medical”) covering eligible U.S. employees.

The following table details the components of net periodic benefit cost for Barnwell’s retirement plans:

	Pension Plan						SERP						Postretirement Medical
	Three months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	77,000		$	59,000		$	16,000		$	11,000		$	—		$	3,000
Interest cost	91,000			84,000			20,000			17,000			13,000			14,000
Expected return on plan assets	(125,000		)	(105,000		)	—			—			—			—
Amortization of prior service cost (credit)	2,000			2,000			(1,000		)	(2,000		)	—			3,000
Amortization of net actuarial loss (gain)	22,000			9,000			6,000			1,000			(2,000		)	(5,000		)
Net periodic benefit cost	$	67,000		$	49,000		$	41,000		$	27,000		$	11,000		$	15,000

	Pension Plan						SERP						Postretirement Medical
	Six months ended March 31,
	2015			2014			2015			2014			2015			2014
Service cost	$	128,000		$	118,000		$	31,000		$	23,000		$	—		$	6,000
Interest cost	178,000			169,000			38,000			33,000			26,000			27,000
Expected return on plan assets	(250,000		)	(210,000		)	—			—			—			—
Amortization of prior service cost (credit)	3,000			3,000			(2,000		)	(3,000		)	—			6,000
Amortization of net actuarial loss (gain)	43,000			18,000			12,000			2,000			(3,000		)	(10,000		)
Net periodic benefit cost	$	102,000		$	98,000		$	79,000		$	55,000		$	23,000		$	29,000

Barnwell contributed $250,000 to the Pension Plan during the six months ended March 31, 2015 and does not expect to make any further contributions during the remainder of fiscal 2015. The SERP and Postretirement Medical plans are unfunded, and Barnwell funds benefits when payments are made. Barnwell does not expect to make any benefit payments under the Postretirement Medical plan during fiscal 2015 and expected payments under the SERP for fiscal 2015 are not material. Fluctuations in actual equity market returns as well as changes in general interest rates will result in changes in the market value of plan assets and may result in increased or decreased retirement benefits costs and contributions in future periods.

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Revenues:
Oil and natural gas	$ 2,092	$ 6,397	$ 5,064	$ 11,724
Contract drilling	491	1,318	2,424	2,927
Sale of interest in leasehold land, net	817	0	1,849	120
Gas processing and other	92	118	187	263
Total revenues	3,492	7,833	9,524	15,034
Costs and expenses:
Oil and natural gas operating	1,818	2,042	3,441	4,663
Contract drilling operating	472	1,089	1,997	2,401
General and administrative	2,104	2,301	4,379	4,157
Depletion, depreciation, and amortization	868	1,904	1,847	4,068
Interest expense	82	192	172	355
Total costs and expenses	5,344	7,528	11,836	15,644
(Loss) income before equity in income (loss) of affiliates and income taxes	(1,852)	305	(2,312)	(610)
Equity in income (loss) of affiliates	368	(116)	456	(263)
(Loss) income before income taxes	(1,484)	189	(1,856)	(873)
Income tax provision	389	513	300	451
Net loss	(1,873)	(324)	(2,156)	(1,324)
Less: Net income (loss) attributable to non-controlling interests	144	(39)	328	(50)
Net loss attributable to Barnwell Industries, Inc.	$ (2,017)	$ (285)	$ (2,484)	$ (1,274)
Basic and diluted net loss per common share attributable to Barnwell Industries, Inc. stockholders (in dollars per share)	$ (0.24)	$ (0.03)	$ (0.30)	$ (0.15)
Weighted-average number of common shares outstanding:
Basic and diluted (in shares)	8,277,160	8,277,160	8,277,160	8,277,160

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LOSS PER COMMON SHARE

6 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

LOSS PER COMMON SHARE

LOSS PER COMMON SHARE

Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share is calculated using the treasury stock method to reflect the assumed issuance of common shares for all potentially dilutive securities, which consist of outstanding stock options. Potentially dilutive shares are excluded from the computation of diluted earnings (loss) per share if their effect is anti-dilutive.

Options to purchase 621,250 and 837,250 shares of common stock were excluded from the computation of diluted shares for the three and six months ended March 31, 2015 and 2014, respectively, as their inclusion would have been antidilutive.

Reconciliations between net loss attributable to Barnwell stockholders and common shares outstanding of the basic and diluted net loss per share computations are detailed in the following tables:

	Three months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,017,000	)	8,277,160	$	(0.24	)

	Six months ended March 31, 2015
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(2,484,000	)	8,277,160	$	(0.30	)

	Three months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(285,000	)	8,277,160	$	(0.03	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(285,000	)	8,277,160	$	(0.03	)

	Six months ended March 31, 2014
	Net Loss (Numerator)			Shares (Denominator)	Per-Share Amount
Basic net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)
Effect of dilutive securities -
common stock options	—			—
Diluted net loss per share	$	(1,274,000	)	8,277,160	$	(0.15	)

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LIQUIDITY

6 Months Ended

Mar. 31, 2015

Risks and Uncertainties [Abstract]

LIQUIDITY

LIQUIDITY

As of March 31, 2015, Barnwell had $9,097,000 in cash and cash equivalents and working capital totaled $8,207,000. Upon the April 2015 renewal of our secured Canadian credit facility, the borrowing capacity thereunder was reduced from $11,800,000 Canadian dollars to $6,500,000 Canadian dollars, or US$5,125,000 at the March 31, 2015 exchange rate. This reduction in the borrowing capacity was largely due to significant declines in the bank’s forecast of oil and natural gas prices and leaves Barnwell with minimal available credit under the facility.

If recent low oil and natural gas prices are sustained, our oil and natural gas segment will continue to experience significant reductions in operating results, cash reserves and liquidity. This, along with minimal available credit under the Canadian credit facility, will adversely affect our ability to replace the Company's declining oil and natural gas reserves. In addition, in January 2015, there was an oil and salt water spill at one of our operated oil properties in Alberta. Total clean up expenses are expected to be approximately $2,300,000, of which we have a 58% working interest. We expect to recover a substantial portion of those expenses from insurance claims and from the other working interest owners for their share of the costs, after which we estimate our net cost to be approximately $160,000, which includes the amount of the insurance policy deductible, estimated legal fees and estimated monitoring and other costs. Based on discussions with our insurer, we currently believe it is probable that these clean up expenses will be covered by insurance. If the insurance reimbursement is less than our current estimate or our joint venture partners fail to reimburse us for their share of costs, there could be a material adverse effect on our operations, liquidity, cash flows and financial condition.

Because of the impact of recent declines in oil and natural gas prices on our oil and natural gas segment, Barnwell estimates that it will be heavily reliant upon land investment segment proceeds in order to provide sufficient liquidity to fund our operations in the near term. Although there has been a recent increase in land investment segment proceeds, there can be no assurance that this trend will continue or that the amount of future land investment segment proceeds will provide the liquidity required. Management is working to improve the Company’s liquidity by, among other things, exploring the sale of certain of its oil and natural gas properties. Management anticipates that such sales will be required to sustain the Company’s operations in the future. However, there can be no assurance that the Company will be successful in securing the sale of any of its oil and natural gas properties.

If oil and natural gas, land investment and residential real estate segment proceeds are not sufficient, Barnwell’s Canadian revolving credit facility is further reduced below the level of borrowings under the facility upon the April 2016 review, and/or we fall short of our key financial debt covenants for our real estate loan and are required to repay all or a portion of our loan borrowings earlier than anticipated, there will be a material adverse effect on our operations, liquidity, cash flows and financial condition, and the Company will need to obtain alternative terms or sources of financing or liquidate investments and/or operating assets to make any required cash outflows. Our liquidity issues may force us to curtail existing operations, reduce or delay capital expenditures, or sell assets on less favorable terms. There can be no assurance the Company will be able to secure the sale of any of its oil and natural gas properties or realize enough proceeds from such sales to fund its operations, or to otherwise resolve its liquidity issues.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Environmental Matters

In January 2015, there was an oil and salt water spill at one of our operated oil properties in Alberta, Canada. We have estimated that probable environmental remediation costs will be approximately $2,300,000. Barnwell’s working interest in the well is 58%, and we expect to recover monies from the other working interest owners for their share of the costs and have accordingly recorded a receivable of $894,000 at March 31, 2015. Additionally, we have filed a claim under our insurance policy, which has a deductible of approximately $80,000, and based on discussions with our insurer we currently believe it is probable that these clean up expenses will be covered by insurance, and as such, a receivable of $1,156,000 was recorded at March 31, 2015, which represents the estimated recovery amount. The total estimated net financial impact for Barnwell, which includes the insurance deductible, estimated legal fees and estimated monitoring and other costs, is approximately $160,000, which has been recorded in the three and six months ended March 31, 2015.

Environmental remediation costs for the oil and salt water spill have not been discounted and were accrued in “Accounts payable” on the Condensed Consolidated Balance Sheets. At March 31, 2015, the gross liability was $1,349,000.

At March 31, 2015 and September 30, 2014, environmental remediation costs of $401,000 and $501,000, respectively, were accrued for the estimated liability for probable environmental remediation costs for soil contamination from infrastructure issues at the Dunvegan and Wood River properties in which we own a non-operating working interest. The estimated liability is based on authorization for expenditure requests and cost estimates received by Barnwell from the property operators in 2013. Environmental remediation costs for Dunvegan and Wood River have not been discounted and were accrued in “Accrued operating and other expenses” on the Condensed Consolidated Balance Sheets.

Because of the inherent uncertainties associated with environmental assessment and remediation activities, future expenses to remediate the currently identified sites, and sites identified in the future, if any, could be incurred.

Guarantee

See Note 6 for a discussion of Barnwell’s guarantee of the Kukio Resort land development partnership’s performance bonds.

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INCOME TAXES

6 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests, are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
United States	$	(179,000	)	$	(1,389,000	)	$	(415,000	)	$	(2,239,000	)
Canada	(1,449,000		)	1,617,000			(1,769,000		)	1,416,000
	$	(1,628,000	)	$	228,000		$	(2,184,000	)	$	(823,000	)

The components of the income tax provision (benefit) are as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Current	$	(350,000	)	$	672,000		$	(347,000	)	$	543,000
Deferred	739,000			(159,000		)	647,000			(92,000		)
	$	389,000		$	513,000		$	300,000		$	451,000

As a result of significant declines in prices, funds available for oil and natural gas capital expenditures are projected to be minimal in the near term and thus Barnwell's ability to replace production and abate declining reserves has been significantly restricted as compared to the recent past. Accordingly, Barnwell has determined that it is not more likely than not that all of our oil and natural gas deferred tax assets under Canadian tax law are realizable. As such, during the quarter ended March 31, 2015, a valuation allowance of $785,000, which increased deferred income tax expense, was recorded for the portion of Canadian tax law deferred tax assets related to asset retirement obligations that may not be realizable.

Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that Canadian taxable income is not sheltered by U.S. source losses, Canadian income taxes are not estimated to have a current or future benefit as foreign tax credits or deductions for U.S. tax purposes, and U.S. consolidated net operating losses are not estimated to have any future U.S. tax benefit prior to expiration. In addition, consolidated taxes in the current year periods include the aforementioned valuation allowance for a portion of deferred tax assets under Canadian tax law.

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INVESTMENTS

6 Months Ended

Mar. 31, 2015

Investments, All Other Investments [Abstract]

INVESTMENTS

INVESTMENTS

A summary of Barnwell’s investments is as follows:

	March 31, 2015		September 30, 2014
Investment in residential parcel	$	1,192,000	$	1,192,000
Investment in land development partnerships	5,114,000		4,658,000
Investment in leasehold land interest – Lot 4C	50,000		50,000
Total investments	$	6,356,000	$	5,900,000

Investment in residential parcels

At March 31, 2015, Kaupulehu 2007 owned one residential parcel in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

A second residential parcel, which was included in investment held for sale at September 30, 2014, was sold in October 2014 for $1,250,000 for a nominal loss which is included in general and administrative expenses in the Condensed Consolidated Statements of Operations.

Investment in land development partnerships

On November 27, 2013, Barnwell, through a wholly-owned subsidiary, entered into two limited liability limited partnerships, KD Kona 2013 LLLP and KKM Makai, LLLP, and indirectly acquired a 19.6% non-controlling ownership interest in each of KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD Kaupulehu, LLLP for $5,140,000. These entities own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KD Kaupulehu, LLLP, which is comprised of KD Acquisition, LLLP (“KD I”) and KD Acquisition II, LLLP (“KD II”), is the developer of Kaupulehu Lot 4A Increments I and II, the area in which Barnwell has interests in percentage of sales payments. Barnwell’s investment in these entities is accounted for using the equity method of accounting.

The limited liability limited partnership agreements provide for a priority return of Barnwell’s investment prior to profit distributions. Net profits, losses and cash flows of the partnerships are allocated to Barnwell and the other partners at varying percentages based on whether the initial and any additional capital contributions plus any preferred returns due to contributing partners have been repaid to the investors.

Barnwell’s share of the income of its equity affiliates was $368,000 and $456,000 for the three and six months ended March 31, 2015, respectively, and the share of the loss of its equity affiliates was $116,000 and $263,000 for the three and six months ended March 31, 2014, respectively. The equity in the underlying net assets of the Kukio Resort land development partnerships exceeds the carrying value of the investment in affiliates by approximately $315,000 as of March 31, 2015, which is attributable to differences in the value of capitalized development costs and a note receivable. The basis difference for the capitalized development costs will be recognized as the partnerships sell lots and recognize the associated costs. The basis difference for the note receivable will be recognized as the partnerships sell memberships for the Kukio Golf and Beach Club for which the receivable relates. The basis difference adjustment for the three and six months ended March 31, 2015 was inconsequential and there was no basis difference adjustment for the three and six months ended March 31, 2014.

Barnwell, as well as KD I, KD II and certain other owners of the partnerships, have jointly and severally executed a surety indemnification agreement. Bonds issued by the surety at March 31, 2015 totaled approximately $4,830,000 and relate to certain construction contracts of KD I and KD II. If any such performance bonds are called, we may be obligated to reimburse the issuer of the performance bond as Barnwell, KD I, KD II and certain other partners are jointly and severally liable, however we believe that it is remote that a material amount of any currently outstanding performance bonds will be called. Performance bonds do not have stated expiration dates. Rather, the performance bonds are released as the underlying performance is completed.

As of March 31, 2015, Barnwell’s maximum loss exposure as a result of its investment in the Kukio Resort land development partnerships was approximately $9,944,000, consisting of the carrying value of the investment of $5,114,000 and $4,830,000 from the surety indemnification agreement of which we are jointly and severally liable.

Summarized financial information for the Kukio Resort land development partnerships is as follows:

	Three months ended March 31, 2015		Three months ended March 31, 2014
Revenue	$	6,081,000	$	1,353,000
Gross profit	$	2,982,000	$	545,000
Net earnings (loss)	$	2,143,000	$	(428,000	)

	Six months ended March 31, 2015		November 27, 2013 - March 31, 2014
Revenue	$	10,707,000	$	1,622,000
Gross profit	$	4,409,000	$	653,000
Net earnings (loss)	$	2,563,000	$	(809,000	)

Percentage of sales payments

Kaupulehu Developments has the right to receive payments from KD I and KD II resulting from the sale of lots and/or residential units within approximately 870 acres of the Kaupulehu Lot 4A area by KD I and KD II in two increments (“Increment I” and “Increment II”) (see Note 16).

The following table summarizes the Increment I percentage of sales payment revenues received from KD I.

	Three months ended   March 31,					Six months ended   March 31,
	2015			2014		2015			2014
Sale of interest in leasehold land:
Proceeds	$	950,000		$	—	$	2,150,000		$	140,000
Fees	(133,000		)	—		(301,000		)	(20,000		)
Revenues – sale of interest in leasehold land, net	$	817,000		$	—	$	1,849,000		$	120,000

Investment in leasehold land interest - Lot 4C

Kaupulehu Developments holds an interest in an area of approximately 1,000 acres of vacant leasehold land zoned conservation located adjacent to Lot 4A. The lease terminates in December 2025.

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NOTE RECEIVABLE

6 Months Ended

Mar. 31, 2015

Receivables [Abstract]

NOTE RECEIVABLE

NOTE RECEIVABLE

In October 2014, Barnwell sold one residential parcel for $1,250,000 and received a down payment of $343,000 and a purchase money mortgage from the buyer for the remainder of the sales price. The note is due 270 days from the closing date and the residential parcel is collateral for the note. The note is non-interest bearing and has accordingly been recorded at a discount using an interest rate based on market rates for similar instruments.

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REAL ESTATE HELD FOR SALE

6 Months Ended

Mar. 31, 2015

Real Estate [Abstract]

REAL ESTATE HELD FOR SALE

REAL ESTATE HELD FOR SALE

Kaupulehu 2007, LLLP (“Kaupulehu 2007”) currently owns one luxury residence that is available for sale in the Lot 4A Increment I area located in the North Kona District of the island of Hawaii, north of Hualalai Resort at Historic Ka`upulehu, between the Queen Kaahumanu Highway and the Pacific Ocean.

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ACQUISITION OF OIL AND NATURAL GAS PROPERTIES

6 Months Ended

Mar. 31, 2015

Extractive Industries [Abstract]

ACQUISITION OF OIL AND NATURAL GAS PROPERTIES

ACQUISITION OF OIL AND NATURAL GAS PROPERTIES

On November 13, 2014, Barnwell completed the acquisition of additional non-operated working interests in oil and natural gas properties located in the Progress area of Alberta, Canada for cash consideration of $526,000, subject to further customary post-closing adjustments. The final determination of the customary adjustments to the purchase price will be made by the parties approximately 180 days after closing. The results of operations for the Progress acquisition have 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 Condensed Consolidated Statements of Operations.

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 purchase price allocation for the acquisition has been finalized except for the settlement of certain post-closing adjustments with the seller to reflect an economic effective date of July 1, 2014. 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. The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 13 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

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SEGMENT INFORMATION (Tables)

6 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

Schedule of financial information related to reporting segments

The following table presents certain financial information related to Barnwell’s reporting segments. All revenues reported are from external customers with no intersegment sales or transfers.

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Revenues:
Oil and natural gas	$	2,092,000		$	6,397,000		$	5,064,000		$	11,724,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	491,000			1,318,000			2,424,000			2,927,000
Other	76,000			112,000			154,000			253,000
Total before interest income	3,476,000			7,827,000			9,491,000			15,024,000
Interest income	16,000			6,000			33,000			10,000
Total revenues	$	3,492,000		$	7,833,000		$	9,524,000		$	15,034,000
Depletion, depreciation, and amortization:
Oil and natural gas	$	772,000		$	1,797,000		$	1,655,000		$	3,856,000
Contract drilling	70,000			78,000			141,000			156,000
Other	26,000			29,000			51,000			56,000
Total depletion, depreciation, and amortization	$	868,000		$	1,904,000		$	1,847,000		$	4,068,000
Operating profit (before general and administrative expenses):
Oil and natural gas	$	(498,000	)	$	2,558,000		$	(32,000	)	$	3,205,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	(51,000		)	151,000			286,000			370,000
Other	50,000			83,000			103,000			197,000
Total operating profit	318,000			2,792,000			2,206,000			3,892,000
Equity in income (loss) of affiliates:
Land investment	368,000			(116,000		)	456,000			(263,000		)
General and administrative expenses	(2,104,000		)	(2,301,000		)	(4,379,000		)	(4,157,000		)
Interest expense	(82,000		)	(192,000		)	(172,000		)	(355,000		)
Interest income	16,000			6,000			33,000			10,000
(Loss) income before income taxes	$	(1,484,000	)	$	189,000		$	(1,856,000	)	$	(873,000	)

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ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Sep. 30, 2014
Changes in foreign currency translation
Beginning accumulated foreign currency translation	$ 1,285	$ 2,921	$ 1,692	$ 3,701
Change in cumulative translation adjustment before reclassifications	(918)	(873)	(1,325)	(1,653)
Amounts reclassified from accumulated other comprehensive income	146	(48)	146	(48)
Income taxes	0	0	0	0
Net current period other comprehensive loss	(772)	(921)	(1,179)	(1,701)
Ending accumulated foreign currency translation	513	2,000	513	2,000
Changes in retirement plans
Beginning accumulated retirement plans benefit cost	(1,924)	(702)	(1,950)	(710)
Amortization of net actuarial loss and prior service cost	27	8	53	16
Income taxes	0	0	0	0
Net current period other comprehensive income	27	8	53	16
Ending accumulated retirement plans benefit cost	(1,897)	(694)	(1,897)	(694)
Accumulated other comprehensive (loss) income, net of taxes	$ (1,384)	$ 1,306	$ (1,384)	$ 1,306	$ (258)

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ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

6 Months Ended

Mar. 31, 2015

Equity [Abstract]

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

The changes in each component of accumulated other comprehensive (loss) income were as follows:

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Foreign currency translation:
Beginning accumulated foreign currency translation	$	1,285,000		$	2,921,000		$	1,692,000		$	3,701,000
Change in cumulative translation adjustment before reclassifications	(918,000		)	(873,000		)	(1,325,000		)	(1,653,000		)
Amounts reclassified from accumulated other comprehensive income	146,000			(48,000		)	146,000			(48,000		)
Income taxes	—			—			—			—
Net current period other comprehensive loss	(772,000		)	(921,000		)	(1,179,000		)	(1,701,000		)
Ending accumulated foreign currency translation	513,000			2,000,000			513,000			2,000,000
Retirement plans:
Beginning accumulated retirement plans benefit cost	(1,924,000		)	(702,000		)	(1,950,000		)	(710,000		)
Amortization of net actuarial loss and prior service cost	27,000			8,000			53,000			16,000
Income taxes	—			—			—			—
Net current period other comprehensive income	27,000			8,000			53,000			16,000
Ending accumulated retirement plans benefit cost	(1,897,000		)	(694,000		)	(1,897,000		)	(694,000		)
Accumulated other comprehensive (loss) income, net of taxes	$	(1,384,000	)	$	1,306,000		$	(1,384,000	)	$	1,306,000

The realized foreign currency transaction loss (gain) related to the repayment of debt was reclassified from accumulated other comprehensive income to general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. The amortization of accumulated other comprehensive loss components for the retirement plans are included in the computation of net periodic benefit cost which is a component of general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations (see Note 9 for additional details).

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SUBSEQUENT EVENT

6 Months Ended

Mar. 31, 2015

Subsequent Events [Abstract]

SUBSEQUENT EVENT

SUBSEQUENT EVENT

In April 2015, Kaupulehu Developments received percentage of sales payments of $643,000 from the sale of two lots within Phase II of Increment I. Financial results from the receipt of these payments will be reflected in Barnwell’s quarter ending June 30, 2015.

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INCOME TAXES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Components of income (loss) before income taxes, after adjusting the income (loss) for non-controlling interests
United States	$ (179)	$ (1,389)	$ (415)	$ (2,239)
Canada	(1,449)	1,617	(1,769)	1,416
Total	(1,628)	228	(2,184)	(823)
Components of the income tax provision (benefit)
Current	(350)	672	(347)	543
Deferred	739	(159)	647	(92)
Total	389	513	300	451
Foreign Tax Authority
Components of the income tax provision (benefit)
Increase in valuation allowance, amount	$ 785

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REAL ESTATE HELD FOR SALE (Details) (Kaupulehu 2007, LLLP)	Mar. 31, 2015 home
Kaupulehu 2007, LLLP
Real estate held for sale
Number of luxury residences owned	1

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
Net loss	$ (1,873)	$ (324)	$ (2,156)	$ (1,324)
Other comprehensive loss:
Foreign currency translation adjustments, net of taxes of $0	(772)	(921)	(1,179)	(1,701)
Retirement plans - amortization of accumulated other comprehensive loss into net periodic benefit cost, net of taxes of $0	27	8	53	16
Total other comprehensive loss	(745)	(913)	(1,126)	(1,685)
Total comprehensive loss	(2,618)	(1,237)	(3,282)	(3,009)
Less: Comprehensive income (loss) attributable to non-controlling interests	144	(39)	328	(50)
Comprehensive loss attributable to Barnwell Industries, Inc.	$ (2,762)	$ (1,198)	$ (3,610)	$ (2,959)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6%-owned land investment general partnership (Kaupulehu Developments), a 75%-owned land investment partnership (KD Kona 2013 LLLP) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method.

Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2014 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2014 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2015, results of operations, comprehensive loss, and equity for the three and six months ended March 31, 2015 and 2014, and cash flows for the six months ended March 31, 2015 and 2014, have been made. The results of operations for the period ended March 31, 2015 are not necessarily indicative of the operating results for the full year.

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

Significant Accounting Policies

Other than as set forth below, there have been no changes to Barnwell’s significant accounting policies as described in the Notes to Consolidated Financial Statements included in Item 8 of the Company’s most recently filed Annual Report on Form 10-K.

Acquisitions

Acquisitions of businesses are accounted for using the acquisition method of accounting. Purchase prices are allocated to acquired assets and assumed liabilities based on their estimated fair value at the time of the acquisition. A business combination may result in the recognition of a gain or goodwill based on the fair value of the assets acquired and liabilities assumed at the acquisition date as compared to the fair value of consideration transferred.

Note Receivable

The note receivable consists of a purchase money mortgage related to the sale of one residential parcel. Barnwell estimates an allowance for this financing receivable based on an evaluation of the credit worthiness of the counterparty and has determined that no allowance is needed at March 31, 2015. This financing receivable is considered in default if not paid in full on the maturity date at which time the amount in default will accrue interest. Amounts deemed uncollectible will be written off against an established allowance.

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date.” This update provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In March 2013, the FASB issued ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This update provides guidance on releasing cumulative translation adjustments when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In April 2013, the FASB issued ASU No. 2013-07, “Liquidation Basis of Accounting,” which provides guidance on when and how to apply the liquidation basis of accounting and on what to disclose. The update requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent, as defined in the update. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In November 2014, the FASB issued ASU 2014-17, “Pushdown Accounting,” which provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.  The election to apply pushdown accounting can be made either in the period in which the change of control occurred or in a subsequent period.  If the election is made in a subsequent period, it would be considered a change in accounting principle and treated in accordance with Topic 250, “Accounting Changes and Error Corrections.” The Company adopted the provisions of this ASU on November 18, 2014, as the amendments in the update were effective upon issuance. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Principles of Consolidation

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Barnwell Industries, Inc. and all majority-owned subsidiaries (collectively referred to herein as “Barnwell,” “we,” “our,” “us,” or the “Company”), including a 77.6%-owned land investment general partnership (Kaupulehu Developments), a 75%-owned land investment partnership (KD Kona 2013 LLLP) and two 80%-owned joint ventures (Kaupulehu 2007, LLLP and Kaupulehu Investors, LLC). All significant intercompany accounts and transactions have been eliminated.

Barnwell’s investments in both unconsolidated entities in which a significant, but less than controlling, interest is held and in variable interest entities (“VIE”) in which the Company is not deemed to be the primary beneficiary are accounted for by the equity method.

Unless otherwise indicated, all references to “dollars” in this Form 10-Q are to U.S. dollars.

Unaudited Interim Financial Information

Unaudited Interim Financial Information

The accompanying unaudited condensed consolidated financial statements and notes have been prepared by Barnwell in accordance with the rules and regulations of the United States (“U.S.”) Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading. These condensed consolidated financial statements and notes should be read in conjunction with the consolidated financial statements and notes thereto included in Barnwell’s September 30, 2014 Annual Report on Form 10-K. The Condensed Consolidated Balance Sheet as of September 30, 2014 has been derived from audited consolidated financial statements.

In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 31, 2015, results of operations, comprehensive loss, and equity for the three and six months ended March 31, 2015 and 2014, and cash flows for the six months ended March 31, 2015 and 2014, have been made. The results of operations for the period ended March 31, 2015 are not necessarily indicative of the operating results for the full year.

Use of Estimates

Use of Estimates

The preparation of the financial statements in conformity with U.S. GAAP requires management of Barnwell to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results could differ significantly from those estimates.

Acquisitions

Acquisitions

Acquisitions of businesses are accounted for using the acquisition method of accounting. Purchase prices are allocated to acquired assets and assumed liabilities based on their estimated fair value at the time of the acquisition. A business combination may result in the recognition of a gain or goodwill based on the fair value of the assets acquired and liabilities assumed at the acquisition date as compared to the fair value of consideration transferred.

Note Receivable

Note Receivable

The note receivable consists of a purchase money mortgage related to the sale of one residential parcel. Barnwell estimates an allowance for this financing receivable based on an evaluation of the credit worthiness of the counterparty and has determined that no allowance is needed at March 31, 2015. This financing receivable is considered in default if not paid in full on the maturity date at which time the amount in default will accrue interest. Amounts deemed uncollectible will be written off against an established allowance.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2013-04, “Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date.” This update provides guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within this guidance are debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In March 2013, the FASB issued ASU No. 2013-05, “Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity.” This update provides guidance on releasing cumulative translation adjustments when a reporting entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. In addition, these amendments provide guidance on the release of cumulative translation adjustments in partial sales of equity method investments and in step acquisitions. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In April 2013, the FASB issued ASU No. 2013-07, “Liquidation Basis of Accounting,” which provides guidance on when and how to apply the liquidation basis of accounting and on what to disclose. The update requires an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent, as defined in the update. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In July 2013, the FASB issued ASU No. 2013-11, “Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists,” which requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (“NOL”) carryforward, or similar tax loss or tax credit carryforward, rather than as a liability when (1) the uncertain tax position would reduce the NOL or other carryforward under the tax law of the applicable jurisdiction and (2) the entity intends to use the deferred tax asset for that purpose. The Company adopted the provisions of this ASU effective October 1, 2014. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements.

In November 2014, the FASB issued ASU 2014-17, “Pushdown Accounting,” which provides companies with the option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity.  The election to apply pushdown accounting can be made either in the period in which the change of control occurred or in a subsequent period.  If the election is made in a subsequent period, it would be considered a change in accounting principle and treated in accordance with Topic 250, “Accounting Changes and Error Corrections.” The Company adopted the provisions of this ASU on November 18, 2014, as the amendments in the update were effective upon issuance. The adoption of this update did not have a material impact on Barnwell’s consolidated financial statements. 

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LIQUIDITY (Details)	3 Months Ended	6 Months Ended
	Mar. 31, 2015 USD ($)	Mar. 31, 2015 USD ($)	Sep. 30, 2014 USD ($)	Mar. 31, 2014 USD ($)	Sep. 30, 2013 USD ($)	Mar. 31, 2015 Canadian revolving credit facility Subsequent event CAD	Apr. 30, 2015 Amended Canadian revolving credit facility Subsequent event USD ($)	Apr. 30, 2015 Amended Canadian revolving credit facility Subsequent event CAD
Line of Credit Facility [Line Items]
Cash and cash equivalents	$ 9,097,000	$ 9,097,000	$ 16,104,000	$ 7,163,000	$ 7,828,000
Working capital	8,207,000	8,207,000
Maximum borrowing capacity						11,800,000	5,125,000	6,500,000
Estimate of probable loss	2,300,000	2,300,000
Percentage of working interest	58.00%	58.00%
Environmental remediation expense	$ 160,000	$ 160,000

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SEGMENT INFORMATION

6 Months Ended

Mar. 31, 2015

Segment Reporting [Abstract]

SEGMENT INFORMATION

SEGMENT INFORMATION

Barnwell operates the following segments: 1) exploring for, developing, acquiring, producing and selling oil and natural gas in Canada (oil and natural gas); 2) investing in land interests in Hawaii (land investment); 3) drilling wells and installing and repairing water pumping systems in Hawaii (contract drilling); and 4) developing homes for sale in Hawaii (residential real estate).

The following table presents certain financial information related to Barnwell’s reporting segments. All revenues reported are from external customers with no intersegment sales or transfers.

	Three months ended   March 31,						Six months ended   March 31,
	2015			2014			2015			2014
Revenues:
Oil and natural gas	$	2,092,000		$	6,397,000		$	5,064,000		$	11,724,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	491,000			1,318,000			2,424,000			2,927,000
Other	76,000			112,000			154,000			253,000
Total before interest income	3,476,000			7,827,000			9,491,000			15,024,000
Interest income	16,000			6,000			33,000			10,000
Total revenues	$	3,492,000		$	7,833,000		$	9,524,000		$	15,034,000
Depletion, depreciation, and amortization:
Oil and natural gas	$	772,000		$	1,797,000		$	1,655,000		$	3,856,000
Contract drilling	70,000			78,000			141,000			156,000
Other	26,000			29,000			51,000			56,000
Total depletion, depreciation, and amortization	$	868,000		$	1,904,000		$	1,847,000		$	4,068,000
Operating profit (before general and administrative expenses):
Oil and natural gas	$	(498,000	)	$	2,558,000		$	(32,000	)	$	3,205,000
Land investment	817,000			—			1,849,000			120,000
Contract drilling	(51,000		)	151,000			286,000			370,000
Other	50,000			83,000			103,000			197,000
Total operating profit	318,000			2,792,000			2,206,000			3,892,000
Equity in income (loss) of affiliates:
Land investment	368,000			(116,000		)	456,000			(263,000		)
General and administrative expenses	(2,104,000		)	(2,301,000		)	(4,379,000		)	(4,157,000		)
Interest expense	(82,000		)	(192,000		)	(172,000		)	(355,000		)
Interest income	16,000			6,000			33,000			10,000
(Loss) income before income taxes	$	(1,484,000	)	$	189,000		$	(1,856,000	)	$	(873,000	)