Barnwell to buy back shares

The company will buy 150,000 of its shares beginning Monday

Barnwell Industries Inc., seeking to take advantage of a sagging stock price, said yesterday its board of directors has authorized a share buyback of up to 150,000 shares on the open market.

The shares can be purchased during the period beginning Monday and ending March 24.

Shares of Barnwell, which operates oil and natural gas operations in Alberta, Canada, and has Big Island real estate holdings, hit a 52-week low of $14.90 on Monday. They closed yesterday at $15.38, down 35.8 percent for the year.

The board said in a statement that it believes the current market price for the stock "does not adequately reflect the intrinsic value" of the stock and proposed that the company "take advantage of the disparity" between the two prices.

In October, the company's then-largest shareholder, Greenwich, Conn.-based Mercury Real Estate Advisors LLC, wrote a letter to Barnwell's board and demanded that the board maximize shareholder value by exploring the sale of Barnwell's oil and natural gas business and implementing a stock buyback, among other things.

Mercury, which then owned 19.2 percent of Barnwell, said at the time there remained "substantial unrealized value" in the assets of the company's energy business and in its real estate holdings on the Big Island. Mercury has since sold off roughly half its stake and now owns just 9.6 percent of the company.

Barnwell Chairman and Chief Executive Morton Kinzler is now the largest shareholder with 15.9 percent.

Alexander Kinzler, president, chief operating officer and general counsel of Barnwell, said Mercury's demands didn't have any direct impact on Barnwell's decision to implement its first stock buyback in at least five years.

"We've considered what's best for the company, its long-term shareholders and the long-term interest of the business," said Kinzler, the son of the chairman and CEO. "We believe the stock is significantly undervalued at this time."

Kinzler also said the company has been in the oil and natural gas business for 51 years and has no intention of exiting that sector.

"The best interest of all our stockholders and the long-term interest of the company are best served by remaining in that business at the present," the younger Kinzler said.

In 2004 and 2005, Barnwell's stock doubled each year and the company split its stock twice -- 3 for 1 and 2 for 1 -- during a 10-month period.

But despite high oil prices, the company's stock has languished this year, partly due to lower net earnings from its Big Island real estate development partnership and the lack of Canadian tax benefits that it capitalized on in fiscal 2006. Through the first nine months of its 2007 fiscal year Barnwell's net income was $3.1 million, down 75.7 percent from $12.8 million a year earlier. Its revenue of $36.2 million was off 24.8 percent from $48.2 million a year ago. The company's fiscal year ends Sept. 30.

For all of fiscal 2006, the company had $14.6 million in net income and $58 million in revenue, marking the best financial performance in the company's history.