Barnwell earnings
soar 480%

First-quarter results
get a boost from its
Kaupulehu Developments
partnership

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By Dave Segal
dsegal@starbulletin.com

Barnwell Industries Inc., getting a boost from a $2.125 million option payment related to its Big Island development partnership, said today that fiscal 2003 first-quarter earnings soared 480 percent.

The Honolulu-based company, which also generated higher profits from its oil and gas operations in Alberta, Canada, said net income in the quarter ending Dec. 31, 2002, was $870,000, or 64 cents a share, compared with $150,000, or 11 cents a share, a year ago.

Revenues increased 49.1 percent to $6 million from $4 million a year earlier.

Barnwell, which has a 77.6 percent stake in Kaupulehu Developments, said it recognized net earnings of $600,000 from the second of 10 scheduled option payments related to development rights within Hualalai Resort in Kona. Barnwell had earnings of $376,000 from a similar payment a year earlier.

Excluding the 2002 and 2001 option payments, Barnwell had a gain of $270,000 in the quarter compared with a loss of $226,000 a year earlier.

Kaupulehu Makai Venture, an affiliate of Japan-based Kojima Corp., has the right to buy the leasehold land. If Kaupulehu Makai Venture exercises all of its options, Barnwell would get an additional eight payments of about $2.7 million each on Dec. 31 every year from 2003 to 2010. That would equate to $21.3 million over the eight years. Barnwell doesn't recognize sales of development rights until cash received exceeds costs incurred and projected costs.

Those development rights are for land adjacent to the Four Seasons Resort golf course where the Champions Tour MasterCard Championship golf tournament was played recently.

Barnwell, whose investment in oil and gas exploration increased 34 percent to $1.9 million in the quarter from a year ago, said net earnings in that division were aided by a $75,000 benefit it received by a reduction in Alberta's corporate tax rate to 13 percent from 13.5 percent. There was no such tax reduction a year earlier. The company didn't break out specific earnings.

Barnwell Chief Financial Officer Russell Gifford said the increase in oil and gas earnings was tied to an increase in prices. "They've been higher because of lower storage, colder weather and higher oil prices reflected by the geopolitical situation in the Middle East," Gifford said.

Gifford said that natural gas was up 66 percent over the year-earlier quarter while oil was up 64 percent.