Barnwell posts loss as
petroleum prices plunge

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By Dave Segal
dsegal@starbulletin.com

Barnwell Industries Inc., citing significant decreases in petroleum prices and a drop in output from the company's maturing oil properties, said Friday it lost $210,000 in its fiscal second quarter as revenues plunged 47.8 percent from year-ago levels.

The Honolulu-based company, whose oil and gas exploration division primarily operates in Alberta, Canada, said second-quarter revenues dropped to $3.7 million from $7.1 million a year earlier. Net income in the comparable 2001 quarter was $1.4 million, or $1.02 a share. The loss per share in the just-ended quarter was 16 cents.

Barnwell, which also develops leasehold land on the Big Island, said in the second quarter it paid the remaining $2.2 million due on the April 2001 purchase of an additional 27 percent interest in Kaupulehu Developments. It now owns 77.6 percent of the partnership.

The company said it did not recognize any operating profit on the transaction in the six-month period that ended March 31, due to a cost-recovery accounting method in which it won't recognize profits until cash received exceeds costs and estimated future costs.

However, the company said earnings for the six months increased by $376,000 in deferred tax benefits related to the transaction.

Barnwell Chairman and Chief Executive Morton H. Kinzler, pointing out that the drop in petroleum prices were "factors beyond the company's control," said the company's overall net earnings were hurt by a $3.6 million, or 59 percent, drop in its oil and natural gas revenues.

Kinzler said that natural gas, natural gas liquids and oil prices declined by 66 percent, 68 percent and 23 percent, respectively, from a year earlier.

The company also said its own oil production fell 23 percent compared with a year ago as output declined from some of Barnwell's more mature oil properties.

"The company continues to invest significant monies in oil and gas exploration and development, investing $1,178,000 during the three months ended March 31, 2002," Kinzler said.

Kinzler also said that Barnwell's smallest subsidiary, which conducts water drilling and pumping operations in Hawaii, "performed well in a very competitive and shrinking water well drilling market, generating operating profits."

The company did not break out any figures for the subsidiary.