OIL AND NATURAL GAS PROPERTIES

Acquisitions

On November 13, 2014, Barnwell completed the acquisition of additional working interests in oil and natural gas properties located in the Progress area of Alberta, Canada, for cash consideration. The sales price per the agreement was adjusted for customary purchase price adjustments to $526,000 in order to, among other things, reflect an economic effective date of July 1, 2014.

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 following table summarizes the allocation of the consideration paid to acquire the properties to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 15 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

On August 27, 2015, Barnwell completed the acquisition of additional working interests in oil and natural gas properties located in the Progress area of Alberta, Canada, for cash consideration. The sales price per the agreement was adjusted for customary purchase price adjustments to $306,000 in order to, among other things, reflect an economic effective date of June 1, 2015. The final determination of the customary adjustments to the purchase price has not yet been made however it is not expected to result in material adjustments.

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 August 27, 2015 acquisition date. The following table summarizes the allocation of the consideration paid to acquire the properties to the assets acquired and liabilities assumed in the transaction as of the acquisition date. See Note 15 for further information regarding the fair value measurement inputs.



Property and equipment	$	397,000
Asset retirement obligation	(91,000		)
Net identifiable assets acquired	$	306,000

The results of operations for both of the Progress acquisitions have been included in the consolidated financial statements from the closing dates. Pro forma information is not presented as the pro forma results would not be materially different from the information presented in the Consolidated Statements of Operations.

2015 Disposition

Barnwell entered into a purchase and sale agreement with an independent third party and, in September 2015, sold its interests in its principal oil and natural gas properties located in the Dunvegan and Belloy areas of Alberta, Canada. The sales price per the agreement was adjusted for preliminary purchase price adjustments to approximately $21,875,000 in order to, among other things, reflect an economic effective date of April 1, 2015. Barnwell's share, after broker's fees and other closing costs, was approximately $14,162,000 and third parties', who were working interest owners in the properties prior to the sale, share, in the aggregate, was approximately $7,247,000. The final determination of the customary adjustments to the purchase price will be made by the parties approximately 180 days after the September 2015 closing date.

From Barnwell's net proceeds, $7,135,000 was withheld in an escrow account for the Canada Revenue Agency for potential amounts due for Barnwell’s Canadian income taxes related to the sale which is included in “Restricted cash” on the Consolidated Balance Sheets. Upon determination by the Canada Revenue Agency of any necessary tax deposits, the escrow agent is to release any such required amount of withheld funds to the Canada Revenue Agency and the remainder to Barnwell.

The relationship between capitalized costs and proved reserves of the sold property and retained properties is significant as there was a 220% difference in capitalized costs divided by proved reserves if the gain was recorded versus the gain being credited against the full-cost pool. Accordingly, Barnwell recorded a gain on the sale of Dunvegan of $6,217,000 in the year ended September 30, 2015 in accordance with the guidance in Rule 4-10(c)(6)(i) of Regulation S-X, which requires an allocation of capitalized costs to the reserves sold and reserves retained on the basis of the relative fair values of the properties as there was a substantial economic difference between the properties sold and those retained. Also included in the gain calculation, were asset retirement obligations of $2,013,000 assumed by the purchaser.

The unaudited pro forma results of operations are presented below as though the disposition of Dunvegan occurred on October 1, 2014. The unaudited pro forma results do not purport to represent what our actual results of operations would have been if the disposition had been completed on such date or to project our results of operations for any future date or period. The pro forma information includes adjustments to oil and natural gas segment revenues and operating expenses based on the actual results of operations related to Dunvegan, as well as adjustments for estimated depletion, accretion expense, general and administrative expenses, and income taxes based on an allocation of the estimated impact of Dunvegan on those amounts.



	Year ended September 30, 2015
Pro forma (unaudited)	Historical		Pro forma
Total revenues	$	17,533,000	$	13,235,000
Net earnings (loss)	$	1,769,000	$	(761,000	)
Net earnings (loss) attributable to Barnwell Industries, Inc. stockholders	$	1,263,000	$	(1,267,000	)
Net earnings (loss) per common share attributable to Barnwell Industries, Inc. stockholders.	$	0.15	$	(0.15	)

2014 Dispositions

In February 2014, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in oil properties located in the Mantario area of Saskatchewan, Canada. The sales price per the agreement was adjusted for customary purchase price adjustments to $2,726,000 in order to, among other things, reflect an economic effective date of January 1, 2014.

In April 2014, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in oil and natural gas properties located in the Chauvin, Cessford and Rat Creek areas of Alberta, Canada. The sales price per the agreement was adjusted for preliminary purchase price adjustments to approximately $4,581,000 in order to, among other things, reflect an economic effective date of March 1, 2014.

In May 2014, Barnwell entered into a purchase and sale agreement with an independent third party and sold its interests in certain oil and natural gas properties located in the Boundary Lake area of Alberta and British Columbia, Canada. The sales price per the agreement was adjusted for preliminary purchase price adjustments to approximately $6,120,000 in order to, among other things, reflect an economic effective date of January 1, 2014.

During the year ended September 30, 2014, Barnwell also sold miscellaneous oil and natural gas properties for proceeds of $692,000.

Total proceeds received from sales of oil and natural gas properties during the year ended September 30, 2014 was $13,846,000.

No gain or loss was recognized in fiscal 2014 as these unplanned sales to multiple counterparties in unrelated transactions did not individually result in a significant alteration of the relationship between capitalized costs and proved reserves.

Pro forma information is not presented for fiscal 2014 dispositions as the pro forma results, individually and in the aggregate, would not be materially different from the information presented in the Consolidated Statements of Operations.