Barnwell earnings drop 32.4%

The firm blames falling petroleum prices and rising operating costs

Barnwell Industries Inc. said yesterday its net income plunged 82.4 percent in its fiscal first quarter as prices for all petroleum products fell and operation costs rose.

The Honolulu-based company, which conducts oil and natural gas operations in Alberta, Canada, posted earnings of $1.1 million, or 13 cents a share, compared with $6.3 million, or 73 cents a share, in the first quarter of 2006. The year-earlier quarter included deferred tax benefits of $2.2 million and a $700,000 gain from the sale of a drill rig.

Revenue declined 24.6 percent to $13.3 million from $17.6 million, with natural gas and oil revenue falling 31 percent, or $3.7 million, from a year ago.

Barnwell also said it was cutting its dividend in half to 5 cents a share from 10 cents. It will be payable March 15 to stockholders of record on March 1. The company had paid a dividend of 5 cents a share for three consecutive quarters before doubling its payout to 10 cents a share in January.

The company's diversification between energy and real estate helped cushion the lower revenue from oil and natural gas as Barnwell's Big Island land holdings produced a 31 percent, or $850,000, year-over-year revenue increase.

Barnwell's $3.6 million in real estate revenue during the quarter came mostly from a $2.3 million option payment received by Kaupulehu Developments, Barnwell's 77.6 percent-owned land development partnership. The payment was the sixth of 10 related to the development rights within Hualalai Resort at Kaupulehu, in the North Kona district.

The remaining $1.3 million in real estate revenue came from a $1.3 million payment received by Kaupulehu Developments for Increment I, an area planned for approximately 80 single-family lots and a beach club on the portion of the property bordering the Pacific Ocean.

"The company continues to pursue avenues for growth in opportunities at Kaupulehu," said Morton Kinzler, Barnwell's chairman and chief executive.

In December, Barnwell invested $3 million in two unrelated limited liability companies to acquire a passive minority interest in Hualalai Resort, which includes the Four Seasons Resort Hualalai at Historic Kaupulehu, two golf courses, undeveloped residential property, and vacant leasehold lands located upland of the Hualalai Resort.

"Hualalai Resort has been one of the most successful resort projects in the U.S. for over 10 years and we are very pleased to be a participant," Kinzler said.