Flat quarter closes record year for Barnwell

The company started out the new year by buying into Hualalai resort

Barnwell Industries Inc. closed out the best fiscal year in the company's 50 year-history with a flat fourth quarter that was saved by a $1.5 million payment for real estate consulting services.

The Honolulu-based company said yesterday the consulting income boosted its net income to $1.84 million, or 21 cents a share, for the fiscal quarter ended Sept. 30. That was 2.2 percent higher than the $1.80 million, or 21 cents a share, earned in the year-earlier quarter when the company had no income from consulting services.

Revenue plunged 16.6 percent to $9.7 million from $11.7 million as natural gas prices decreased from a year earlier.

It was a different story for the fiscal year, though, as Barnwell more than doubled its net income to $14.6 million, or $1.68 a share, from $6 million, or 70 cents a share.

Revenue soared 31.1 percent to $58 million from $44.2 million as oil and natural gas sales increased 5.2 million, or 16.2 percent, from fiscal 2005.

The record full-year results prompted the board of directors to double the quarterly dividend to 10 cents a share, payable Jan. 15 to stockholders of record on Dec. 28.

Morton Kinzler, chairman and chief executive of Barnwell, called fiscal 2006 a "golden year" because of the 50-year anniversary of the company and the plethora of activity throughout the year.

"Record earnings in our oil and natural gas segment, the closing of a real estate transaction on Increment II by Kaupulehu Developments, Barnwell's 77.6 percent-owned land development partnership, and positive results in our contract drilling operations and favorable tax changes all contributed to this exemplary year," Kinzler said.

Earlier this month, Barnwell started out its new fiscal year by acquiring a passive minority ownership interest in Hualalai Resort, which was developed on land originally rezoned by Kaupulehu Developments.

The resort includes the Four Seasons Resort Hualalai at Historic Kaupulehu in North Kona, two golf courses and undeveloped residential property.

Barnwell, which is diversified across several industries, has oil and natural gas operations in Alberta, Canada, real estate holdings on the Big Island and conducts statewide water drilling.

It's because of that diversification that the company's largest shareholder, Greenwich, Conn.-based Mercury Real Estate Advisors LLC, demanded in an October letter to Barnwell's board that the company explore the sale of its oil and natural gas business in Canada, implement a stock buyback and sell lots on the 1,000 acres that Barnwell owns on the Big Island.

At the time of the letter, Mercury owned 19.2 percent of Barnwell.

"We believe there is no synergistic advantage to the current corporate structure," Mercury wrote in calling for a breakup of the company.

In response, Barnwell said at the time it would not take "any precipitous action" based on shareholder comments and would take the matter under advisement.

Barnwell did not address any of those issues in yesterday's earnings announcement.