Barnwell Industries Inc
Barnwell was incorporated in Delaware in 1956 and fiscal 2017 represented Barnwell’s
61st year of operations. Barnwell operates in the following three principal
business segments:
Oil and Natural Gas Segment - Barnwell engages in oil and natural gas development,
production, acquisitions and sales in Canada.
Land Investment Segment - Barnwell invests in land interests in Hawaii.
Contract Drilling Segment - Barnwell provides well drilling services and water
pumping system installation and repairs in Hawaii.
Through our wholly-owned subsidiary, Barnwell of Canada, we are involved in
the acquisition and development of oil and natural gas properties. Barnwell
of Canada initiates and participates in acquisition and developmental operations
for oil and natural gas on properties in which it has an interest and evaluates
proposals by third parties with regard to participation in exploratory and developmental
operations elsewhere. Over the past several years the upstream oil and natural
gas business has evolved from the traditional exploration and production model
to a much more capital intensive and technologically-advanced business based
on drilling horizontal wells of considerable length and performing multi-stage
hydraulic fracturing.
Barnwell’s investments in oil and natural gas properties are located
in Canada, principally in the province of Alberta. These property interests
are principally held under governmental leases or licenses. Under the typical
Canadian provincial governmental lease, Barnwell must perform exploratory operations,
establish production and comply with certain other conditions. Lease terms vary
with each province, but, in general, the terms grant Barnwell the right to remove
oil, natural gas and related substances subject to payment of royalties on production
that vary based on production rates and commodity prices.
All acquisition and developmental activities, as well as all field operations
and regulatory compliance, are the direct responsibility of Barnwell of Canada’s
President and Chief Operating Officer, with strategic direction and approvals
for major expenditures secured from Barnwell’s senior executive management.
In fiscal 2017, Barnwell participated in acquisition and developmental operations
in Alberta, although Barnwell does not limit its consideration of acquisition
and developmental operations to this area.
Our oil and natural gas segment revenues, profitability, and future rate of
growth are dependent on oil and natural gas prices. The industry has experienced
a prolonged period of low oil and natural gas prices that has negatively impacted
our operating results, cash flows and liquidity. Credit and capital markets
for oil and natural gas companies have been negatively affected as well, resulting
in a decline in sources of financing as compared to previous years.
Natural gas prices are typically higher in the winter than at other times
due to increased heating demand. Oil prices are also subject to seasonal fluctuations,
but to a lesser degree. Oil and natural gas unit sales are based on the quantity
produced from the properties by the properties’ operator.
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