SUPPLEMENTARY OIL AND NATURAL GAS INFORMATION (UNAUDITED)

12 Months Ended

Sep. 30, 2020

Oil and Gas Exploration and Production Industries Disclosures [Abstract]

SUPPLEMENTARY OIL AND NATURAL GAS INFORMATION (UNAUDITED)

The following tables summarize information relative to Barnwell’s oil and natural gas operations, which are conducted in Canada. Proved reserves are the estimated quantities of oil, natural gas and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions. Proved producing oil and natural gas reserves are reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. The estimated net interests in total proved and proved producing reserves are based upon subjective engineering judgments and may be affected by the limitations inherent in such estimations. The process of estimating reserves is subject to continual revision as additional information becomes available as a result of drilling, testing, reservoir studies and production history. There can be no assurance that such estimates will not be materially revised in subsequent periods.

(A) Oil and Natural Gas Reserves

The following table summarizes changes in the estimates of Barnwell’s net interests in total proved reserves of oil and natural gas liquids and natural gas, which are all in Canada. All of the information regarding reserves in this Form 10-K is derived from the report of our independent petroleum reserve engineers, InSite, and is included as an Exhibit to this Form 10-K. The Company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries and undeveloped locations are more imprecise than estimates of established proved producing oil and natural gas properties. Accordingly, these estimates are expected to change as future information becomes available.

Proved oil and natural gas reserves are the estimated quantities of oil and natural gas that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions (i.e., prices and costs) existing at the time the estimate is made. Proved developed oil and natural gas reserves are proved reserves that can be expected to be recovered through existing wells and equipment in place and under operating methods being utilized at the time the estimates were made.


	OIL & NGL (Bbls)	GAS (Mcf)	Total (Boe)
Proved reserves:
Balance at September 30, 2018	1,590,000	5,055,000	2,462,000
Revisions of previous estimates	(74,000)	(21,000)	(78,000)
Extensions, discoveries and other additions	14,000	33,000	20,000
Acquisitions of reserves	30,000	81,000	44,000

Less production	(141,000)	(628,000)	(250,000)
Balance at September 30, 2019	1,419,000	4,520,000	2,198,000
Revisions of previous estimates	(740,000)	(1,746,000)	(1,041,000)

Acquisitions of reserves	68,000	628,000	176,000
Less sales of reserves	(38,000)	(443,000)	(114,000)
Less production	(174,000)	(649,000)	(286,000)
Proved Reserves, September 30, 2020	535,000	2,310,000	933,000
Proved Developed Reserves, September 30, 2020	530,000	2,310,000	928,000
Proved Undeveloped Reserves, September 30, 2020	5,000	—	5,000

(B) Capitalized Costs Relating to Oil and Natural Gas Producing Activities

All capitalized costs relating to oil and natural gas producing activities, which were being depleted in all years, are summarized as follows:


	September 30,
	2020		2019
Proved properties	$	64,142,000	$	62,075,000
Unproved properties	—		130,000
Total capitalized costs	64,142,000		62,205,000
Accumulated depletion, depreciation, and impairment	61,839,000		55,972,000
Net capitalized costs	$	2,303,000	$	6,233,000


	Year ended September 30,
	2020		2019
Acquisition of properties:
Unproved	$	—	$	—
Proved	242,000		668,000

Development costs	2,857,000		(622,000)
Total	$	3,099,000	$	46,000

Costs incurred in the table above include additions and revisions to Barnwell’s asset retirement obligation of $(52,000) and $(755,000) for the years ended September 30, 2020 and 2019, respectively.

(D) Results of Operations for Oil and Natural Gas Producing Activities


	Year ended September 30,
	2020		2019
Net revenues	$	6,693,000	$	6,406,000
Production costs	(4,850,000)		(5,213,000)
Depletion	(1,747,000)		(2,680,000)
Reduction of carrying value of oil and natural gas properties	(4,326,000)		(5,710,000)
Pre-tax results of operations (1)	(4,230,000)		(7,197,000)
Estimated income tax expense (2)	—		(160,000)
Results of operations (1)	$	(4,230,000)	$	(7,357,000)

_________________

(1) Before gain on sale of oil and natural gas properties, general and administrative expenses, interest expense, and foreign exchange gains and losses.

(2) Estimated income tax expense includes changes to the deferred income tax valuation allowance necessary for the portion of Canadian tax law deferred tax assets that may not be realizable.

(E) Standardized Measure, Including Year-to-Year Changes Therein, of Estimated Discounted Future Net Cash Flows

The following tables utilize reserve and production data estimated by independent petroleum reserve engineers. The information may be useful for certain comparison purposes but should not be solely relied upon in evaluating Barnwell or its performance. Moreover, the projections should not be construed as realistic estimates of future cash flows, nor should the standardized measure be viewed as representing current value.

The estimated future cash flows at September 30, 2020 and 2019 were based on average sales prices in effect on the first day of the month for the preceding twelve month period in accordance with SEC Release No. 33-8995. The future production and development costs represent the estimated future expenditures that we will incur to develop and produce the proved reserves, assuming continuation of existing economic conditions. The future income tax expenses were computed by applying statutory income tax rates in existence at September 30, 2020 and 2019 to the future pre-tax net cash flows relating to proved reserves, net of the tax basis of the properties involved.

Material revisions to reserve estimates may occur in the future, development and production of the oil and natural gas reserves may not occur in the periods assumed and actual prices realized and actual costs incurred are expected to vary significantly from those used. Management does not rely upon this information in making investment and operating decisions; rather, those decisions are based upon a wide range of factors, including estimates of probable reserves as well as proved reserves and price and cost assumptions different than those reflected herein.

In December 2018, the Society of Petroleum Evaluation Engineers and associated industry professionals updated the COGE Handbook. The updates clarify and streamline existing guidelines and offer additional guidance regarding Canadian reserves evaluations. Barnwell has included all abandonment, decommissioning and reclamation costs and inactive well costs in accordance with best practice recommendations into the Company’s September 30, 2020 and September 30, 2019 year-end reserve reports.

Standardized Measure of Discounted Future Net Cash Flows


	September 30,
	2020		2019
Future cash inflows	$	20,426,000	$	65,720,000
Future production costs	(17,860,000)		(41,733,000)
Future development costs	(73,000)		(13,295,000)
Future income tax expenses	(92,000)		(450,000)
Future net cash flows excluding abandonment, decommissioning and reclamation	2,401,000		10,242,000
Future abandonment, decommissioning and reclamation	(13,055,000)		(13,190,000)
Future net cash flows	(10,654,000)		(2,948,000)
10% annual discount for timing of cash flows	8,969,000		5,258,000
Standardized measure of discounted future net cash flows	$	(1,685,000)	$	2,310,000

Changes in the Standardized Measure of Discounted Future Net Cash Flows


	Year ended September 30,
	2020		2019
Beginning of year	$	2,310,000	$	13,836,000
Sales of oil and natural gas produced, net of production costs	(1,843,000)		(1,193,000)
Net changes in prices and production costs, net of royalties and wellhead taxes	(1,876,000)		(15,358,000)
Extensions and discoveries	—		891,000
Net change due to purchases and sales of minerals in place	467,000		334,000
Previously estimated development costs incurred	1,305,000		—
Changes in future development costs	7,773,000		—
Revisions of previous quantity estimates	(10,274,000)		(71,000)
Net change in income taxes	288,000		3,792,000
Accretion of discount	230,000		1,350,000
Other - changes in the timing of future production and other	(63,000)		(932,000)
Other - net change in Canadian dollar translation rate	(2,000)		(339,000)
Net change	(3,995,000)		(11,526,000)
End of year	$	(1,685,000)	$	2,310,000