Barnwell Industries Inc: Form 10-Q for the period ended Jun 30, 2026

Cautionary Statement Relevant to Forward-Looking Information

For the Purpose Of “Safe Harbor” Provisions Of The

Private Securities Litigation Reform Act of 1995

This Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). A forward-looking statement is one which is based on current expectations of future events or conditions and does not relate to historical or current facts. These statements include various estimates, forecasts, projections of Barnwell’s future performance, statements of Barnwell’s plans and objectives, and other similar statements. All such statements we make are forward-looking statements made under the safe harbor of the PSLRA, except to the extent such statements relate to the operations of a partnership or limited liability company. Forward-looking statements include phrases such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “predicts,” “estimates,” “assumes,” “projects,” “may,” “will,” “will be,” “should,” or similar expressions. Although Barnwell believes that its current expectations are based on reasonable assumptions, it cannot assure that the expectations contained in such forward-looking statements will be achieved. Forward-looking statements involve risks, uncertainties and assumptions which could cause actual results to differ materially from those contained in such statements. The risks, uncertainties and other factors that might cause actual results to differ materially from Barnwell’s expectations are set forth in the “Forward-Looking Statements” and “Risk Factors” sections of Barnwell’s 2025 Annual Report. Investors should not place undue reliance on these forward-looking statements, as they speak only as of the date of filing of this Form 10-Q, and Barnwell expressly disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statements contained herein.

Critical Accounting Policies and Estimates

Management has determined that our most critical accounting policies and estimates are those related to the full-cost ceiling calculation and depletion of our oil and natural gas properties and the calculation of our income taxes, all of which are discussed in our 2025 Annual Report. There have been no significant changes to these critical accounting policies and estimates during the three and nine months ended June 30, 2026. We continue to monitor our accounting policies to ensure proper application of current rules and regulations.

Current Outlook

Going Concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business for the twelve-month period following the date of issuance of these condensed consolidated financial statements.

Overview

As disclosed in Note 3 “Discontinued Operations” to the Condensed Consolidated Financial Statements (unaudited) included in this report, on March 14, 2025, the Company entered into and completed the sale of its wholly-owned subsidiary, Water Resources. Water Resources drilled water wells and installed and repaired water pumping systems in Hawaii and represented our contract drilling segment. As a result of the sale, the Company has classified the related assets and liabilities and the results of its contract drilling business as discontinued operations in the condensed consolidated financial statements for all periods presented.

Accordingly, Barnwell’s continuing operations are engaged in the following lines of business: 1) acquiring, developing, producing and selling oil and natural gas in Canada (oil and natural gas segment) and 2) leasehold land interests in Hawaii (land investment segment).

Oil and Natural Gas Segment

Barnwell is involved in the acquisition and development of oil and natural gas properties in Canada where we initiate and participate in acquisition and developmental operations for oil and natural gas on properties in which we have an interest, and evaluate proposals by third parties with regard to participation in exploratory and developmental operations elsewhere. Additionally, through its wholly-owned subsidiaries, Barnwell was, until August 8, 2025, involved in several non-operated oil and natural gas investments in Oklahoma and Texas.

Land Investment Segment

Through Barnwell’s 77.6% interest in Kaupulehu Developments, 75.0% interest in KD Kona, and 34.45% non-controlling interest in KKM Makai, the Company’s land investment interests include the following:

• The right to receive percentage of sales payments from KD I resulting from the sale of single-family residential lots by KD I, within Increment I of the Kaupulehu Lot 4A area located in the North Kona District of the island of Hawaii. However, in the quarter ended March 31, 2024, the last two remaining single-family lots of the 80 lots developed within Increment I were sold and there are no more lots available for sale in Increment I. Kaupulehu Developments was entitled to receive payments from KD I based on 10% of the gross receipts from KD I’s sales at Increment I.
• The right to receive 15% of the distributions of KD II, the cost of which is to be solely borne by KDK out of its 55% ownership interest in KD II, plus a priority payout of 10% of KDK's cumulative net profits derived from Increment II sales subsequent to Phase 2A, up to a maximum of $3,000,000. Such interests are limited to distributions or net profits interests and Barnwell does not have any partnership interest in KD II or KDK through its interest in Kaupulehu Developments. Barnwell also has rights to three single-family residential lots in Phase 2A of Increment II, and four single-family residential lots in phases subsequent to Phase 2A when such lots are developed by KD II, all at no cost to Barnwell. Barnwell is committed to commence construction of improvements within 90 days of the transfer of the four lots in the phases subsequent to Phase 2A as a condition of the transfer of such lots. Also, in addition to Barnwell's existing obligations to pay professional fees to certain parties based on percentages of its gross receipts, Kaupulehu Developments is also obligated to pay an amount equal to 0.72% and 0.20% of the cumulative net profits of KD II to KD Development, LLC and a pool of various individuals,

respectively, all of whom are partners of KKM and are unrelated to Barnwell. The remaining acreage within Increment II is not yet under development, and there is no assurance that development of such acreage will in fact occur. No definitive development plans have been made by KD II, the developer of Increment II, as of the date of this report.

• An indirect 19.60% non-controlling ownership interest in KD Kukio Resorts, LLLP, KD Maniniowali, LLLP and KD I and an indirect 10.80% non-controlling ownership interest in KD II through KDK. These entities, collectively referred to hereinafter as the “Kukio Resort Land Development Partnerships,” own certain real estate and development rights interests in the Kukio, Maniniowali and Kaupulehu portions of Kukio Resort, a private residential community on the Kona coast of the island of Hawaii, as well as Kukio Resort’s real estate sales office operations. KDK was the developer of Kaupulehu Lot 4A Increments I and II. The partnerships derive income from the sale of residential parcels in Increment I, which is now completely sold, as well as from commissions on real estate resales by the real estate sales office and revenues resulting from the sale of private club memberships, a few of which remain available for sale.

The Kukio Resort Land Development Partnerships have remaining Increment I obligations to complete project amenities, infrastructure, beautification, and restoration of certain areas and therefore has yet to fully recognize its deferred profit on the Increment I project as a whole. The Increment I deferred profit at June 30, 2026 for the Kukio Resort Land Development Partnerships as a whole was approximately $2,600,000; the recognition of which is dependent upon the completion of the Increment I obligations. The Kukio Resort Land Development Partnerships have accrued estimated costs of these obligations of approximately $1,600,000. The Kukio Resort Land Development Partnerships currently appears to have the ability to fund those obligations but there are no assurances that they can ultimately do so in the future if unforeseen events occur. The Kukio Resort Land Development Partnerships will recognize the Increment I deferred revenue and costs of sales on a percentage completion basis as the cash outlays to complete the remaining project obligations are made. The Kukio Resort Land Development Partnerships’ deferred profit and accrued costs to complete are not reflected in Barnwell’s Condensed Consolidated Balance Sheets as we account for our investment in the Kukio Resort Land Development Partnerships under the equity method of accounting. No percentage of sales payments will be earned by Barnwell on any future recognition of Increment I deferred profit as such payments were already fully earned and received based on cash received by the Kukio Resort Land Development Partnerships as the Increment I lots were sold.

• Approximately 1,000 acres of vacant leasehold land zoned conservation in the Kaupulehu Lot 4C area, which currently has no development potential without both a development agreement with the lessor and zoning reclassification. The lease expired by its terms in December 2025.
• Contracts to Sell Interests in Increment II
• In November 2025, Kaupulehu Developments entered into an agreement with Mr. David Johnston, the son of Mr. Terry Johnston, a partner in Kaupulehu Developments, to surrender any and all remaining rights of Kaupulehu Developments for Increment II for the total consideration of $2,000,000. The purchaser paid an initial $70,000 which was recognized as revenue during the nine months ended June 30, 2026. Additionally, the purchaser has the right to extend the closing by up to two years by making a $70,000 payment in each of the next two years, with those payments applied against the $2,000,000 purchase price. The transaction remains subject to the purchaser's election to proceed and

other closing conditions. Because the agreement is subject to substantive contingencies and closing conditions that have not been satisfied, the criteria for revenue recognition under ASC 606 have not been met. Accordingly, no additional revenue has been recognized in the financial statements.

• Also in November 2025, pursuant to a unit purchase agreement, KDK agreed to sell KDK’s interests in Increment II to Mr. David Johnston for $2,109,000. The unit purchase agreement is subject to due diligence, and there is no certainty that the transaction will close. Furthermore, there is also no assurance on the timing or amounts that the general partner of KDK would distribute upon a closing. Again, there are substantive contingencies and closing conditions that have not been satisfied, and in turn no revenue has been recognized in the financial statements.

On July 31, 2026, BHP and Kaupulehu Developments entered into a Purchase and Sale Agreement with Mr. David Johnston to sell substantially all of the Company’s remaining Hawaii real estate-related interests, including BHP’s 34.45% limited partner interest in KKM, BHP’s 75% general partner interest in KD Kona, and Kaupulehu Developments’ rights in KD II, Increment II, and the Agreement to Terminate Project Rights described above, for an aggregate purchase price of $1,770,000 in cash. Closing is expected to occur on or before September 15, 2026, subject to customary closing conditions, and, if consummated, the Company expects the transaction to result in a complete exit from all of its known remaining Hawaii real estate-related interests, subject to minimal administrative winding up activities. There can be no assurance that the closing will occur on the anticipated timeline or at all. See Note 6 “Investments” and Note 20 “Subsequent Events” to the Condensed Consolidated Financial Statements (unaudited) included in this report for additional information.

Results of Operations

Summary of Results From Continuing Operations

The net loss from continuing operations attributable to Barnwell was $440,000 for the three months ended June 30, 2026, compared with a net loss from continuing operations attributable to Barnwell of $1,550,000 for the three months ended June 30, 2025, representing an improvement of $1,110,000. The improvement in results was primarily attributable to:

• Oil and Natural Gas Segment

Operating results from the oil and natural gas segment improved by $730,000 for the three months ended June 30, 2026 compared with the prior year period. This increase was primarily due to:

• A $188,000 increase in oil and natural gas revenues;
• A $298,000 decrease in oil and natural gas depletion expense;
• A $44,000 decrease in the oil and natural gas operating expenses; and
• A $200,000 reduction in impairment.

The increase in oil and natural gas revenues was primarily driven by higher commodity prices, partially offset by lower production volumes. The decrease in net production resulted primarily from Barnwell's disposition of its U.S. oil and natural gas assets on August 8, 2025 and the sale of its interest in certain Canadian oil and natural gas properties on August 28, 2025. In addition, natural production declines from wells in the Company's Twining area lowered production volumes.

For the three months ended June 30, 2025, the U.S. oil and natural gas assets that were subsequently sold contributed oil and natural gas revenues of $347,000, oil and natural gas operating expenses of $129,000, depletion expense of $99,000 and impairments of $200,000. The interest of certain oil and natural gas properties in Canada that were sold contributed oil and natural gas revenues of $89,000, oil and natural gas operating expenses of $39,000, and depletion expense of $26,000.

• General and Administrative Expenses

General and administrative expenses decreased by $459,000 for the three months ended June 30, 2026 compared with the prior-year period. The decrease was primarily attributable to: $759,000 reduction in professional service fees, largely reflecting lower legal, proxy solicitation, proxy advisory and public relations costs associated with the shareholder consent solicitation and proxy contest in the prior year period; $59,000 decrease in shareholder-related expenses; $39,000 decrease in office expenses, primarily related to the closure of the Company's Hawaii office on January 31, 2026; and a $21,000 decrease in expenses associated with the Pension Plan and Supplemental Executive Retirement Plan.

These decreases were offset by a $107,000 increase in share-based compensation, a $34,000 increase in directors' fees, and a $348,000 insurance recovery that was recognized in the prior-year period.

The remaining decrease in general and administrative expenses was attributable to the Company's ongoing cost-savings initiatives.

• Other Factors

Results also benefited from a $376,000 increase in equity in income from affiliates and a $40,000 increase in net income attributable to non-controlling interest, all of which related to Barnwell's land investment segment activities.

These favorable factors were partially offset by:

A $275,000 unfavorable change in foreign currency impacts. The Company recorded a foreign currency loss of $56,000 during the current period, compared with a foreign currency gain of $219,000 during the prior-year period, due to exchange rate fluctuations affecting intercompany loans and advances denominated in Canadian dollars.

The net loss from continuing operations attributable to Barnwell was $3,016,000 for the nine months ended June 30, 2026, compared with a net loss from continuing operations attributable to Barnwell of $4,686,000 for the nine months ended June 30, 2025, representing an improvement of $1,670,000. The improvement in results was primarily attributable to:

• Oil and Natural Gas Segment

Operating results from the oil and natural gas segment improved by $149,000 for the nine months ended June 30, 2026 compared with the prior-year period. The increase was primarily due to:

• A $612,000 decrease in oil and natural gas operating expenses;
• A $811,000 decrease in oil and natural gas depletion expense;
• A $865,000 decrease in impairment; offset by
• A $2,139,000 decrease in oil and natural gas revenues.

The decrease in oil and natural gas revenues, oil and natural gas operating expenses and depletion expense was due to lower production volumes resulting from Barnwell's disposition of its U.S. oil and natural gas assets on August 8, 2025, the sale of its interest in certain Canadian oil and natural gas properties on August 28, 2025, and natural production declines from wells in the Company's Twining area.

For the nine months ended June 30, 2025, the U.S. oil and natural gas assets that were subsequently sold contributed oil and natural gas revenues of $1,078,000, oil and natural gas operating expenses of $389,000, depletion expense of $324,000 and impairments of $865,000. The interest of certain oil and natural gas properties in Canada that were sold contributed oil and natural gas revenues of $254,000, oil and natural gas operating expenses of $174,000, and depletion expense of $76,000 during the same period.

The impact of lower production volumes was partially offset by higher realized commodity prices during the nine months ended June 30, 2026.

• General and Administrative Expenses

General and administrative expenses decreased by $647,000 for the nine months ended June 30, 2026 compared with the prior-year period. The decrease was primarily due to a $1,126,000 reduction in professional service fees largely reflecting lower legal, proxy solicitation, proxy advisory and public relations costs associated with the shareholder consent solicitation and proxy contest in the prior year period, net of insurance recoveries, a $43,000 decrease in office expenses, primarily related to the closure of the Company's Hawaii office on January 31, 2026, and a $38,000 decrease in shareholder-related expenses.

These decreases were partially offset by $225,000 higher salaries and wages due to bonuses and retirement payments related to the Hawaii office closure on January 31, 2026, a $200,000 increase in share-based compensation, a $63,000 increase in director's expense, $72,000 increase in expenses associated with the Pension Plan and Supplemental Executive Retirement Plan, and $45,000 increase in travel and entertainment expenses.

The remaining decrease in general and administrative expenses was attributable to the Company's ongoing cost-savings initiatives.

• Other Factors

Results also benefited from a $714,000 increase in equity in income from affiliates, a $90,000 increase in net income attributable to non-controlling interests, and a $70,000 increase in land investment segment operating results, before non-controlling interests’ share of such profits, primarily due to the Kukio Resort Land Development Partnerships' sale of two lots in the current year period, compared with no lots sold in the prior year period.

General

Barnwell conducts operations in the U.S. and Canada. Consequently, Barnwell is subject to foreign currency translation and transaction gains and losses due to fluctuations of the exchange rates between the Canadian dollar and the U.S. dollar. Barnwell cannot accurately predict future fluctuations of the exchange rates and the impact of such fluctuations may be material from period to period. To date, we have not entered into foreign currency hedging transactions. Foreign currency gains or losses on intercompany loans and advances that are not considered long-term investments in nature because management intends to settle these intercompany balances in the future are included in our condensed consolidated statements of operations.

Based on average exchange rates, the Canadian dollar averaged approximately the same value relative to the U.S. dollar during the three months ended June 30, 2026 and strengthened 2% during the nine months ended June 30, 2026, compared with the corresponding periods of the prior year. Based on period-end exchange rates, as of June 30, 2026, the Canadian dollar had weakened 2% relative to the U.S. dollar compared with September 30, 2025.

Because Barnwell has subsidiaries that operate in Canada and use the Canadian dollar as their functional currency, changes in exchange rates affect the translation of those subsidiaries' financial statements into U.S. dollars. As a result, the Company's reported assets, liabilities, stockholders’ equity, revenues and expenses are impacted by fluctuations in the Canadian-U.S. dollar exchange rate.

Translation adjustments are recorded in accumulated other comprehensive income (loss) and are not included in net earnings (loss). For the three months ended June 30, 2026, other comprehensive income related to foreign currency translation adjustments, net of taxes, was $40,000, compared with other comprehensive loss of $37,000 for the same period in the prior year, an increase of $77,000. For the nine months ended June 30, 2026, other comprehensive income related to foreign currency translation adjustments, net of taxes, was $52,000, compared with $53,000 for the same period in prior year, a $1,000 decrease.

No income tax expense or benefit was recognized on foreign currency translation adjustments during the three and nine months ended June 30, 2026 or 2025 because the related deferred tax assets remain subject to a full valuation allowance.

Oil and Natural Gas

The following tables set forth Barnwell’s average prices per unit of production and net production volumes. Production amounts reported are net of royalties.

* Mcf = 1,000 cubic feet. Natural gas price per unit is net of pipeline charges.

** Bbl = stock tank barrel equivalent to 42 U.S. gallons

*** BOE = barrels of oil equivalent, using a conversion rate of 1 bbl : 6 mcf

The oil and natural gas segment generated operating profit before general and administrative expenses of $757,000 for the three months ended June 30, 2026, compared with $27,000 for the corresponding prior-year period, an increase of $730,000. The improvement in operating results was primarily attributable to:

• A $188,000 increase in oil and natural gas revenues;
• A $44,000 decrease in the oil and natural gas operating expenses;
• A $298,000 decrease in oil and natural gas depletion expense; and
• A $200,000 decrease in impairment.

The increase in oil and natural gas revenues was primarily driven by higher realized commodity prices, partially offset by lower production volumes.

Average realized commodity prices increased by 45% for oil, 14% for natural gas, and 83% for natural gas liquids ("NGLs") compared to the prior-year period, driven by increases in the underlying benchmark prices.

These increases were partially offset by production decreases of 24% for oil, 10% for natural gas and 50% for NGLs. Production volumes declined as a result of the sale of Barnwell's U.S. oil and natural gas assets on August 8, 2025, the sale of Barnwell's interest in certain oil and natural gas properties in Canada on August 28, 2025, and natural production declines in Barnwell's Twining-area wells. The U.S. oil and natural gas assets sold on August 8, 2025 contributed net production of 14,000 BOE in the three months ended June 30, 2025. The interest in certain oil and natural gas properties in Canada sold on August 28, 2025 contributed net production of 4,000 BOE in the three months ended June 30, 2025.

The U.S. oil and natural gas assets sold on August 8, 2025 contributed oil and natural gas revenues of $347,000, oil and natural gas operating expenses of $129,000, depletion expense of $99,000 and impairments of $200,000 during the three months ended June 30, 2025. The interest in certain oil and natural gas properties in Canada sold on August 28, 2025 contributed oil and natural gas revenues of $89,000, oil and natural gas operating expenses of $39,000, and depletion expense of $26,000 during the same period.

The oil and natural gas segment generated operating profit before general and administrative expenses of $812,000 for the nine months ended June 30, 2026, compared with $663,000 for the corresponding prior-year period, an increase of $149,000. The improvement in operating results is primarily attributable to the following favorable factors:

• A $612,000 decrease in oil and natural gas operating expenses;
• A $811,000 decrease in oil and natural gas depletion expense; and
• A $865,000 decrease in impairment.

These favorable factors were partially offset by a $2,139,000 decrease in oil and natural gas revenues. The decrease in oil and natural gas revenues was primarily driven by lower production volumes, partially offset by higher realized commodity prices.

Production decreased 26% for oil, 14% for natural gas and 42% for NGLs. Production volumes declined as a result of the sale of Barnwell's U.S. oil and natural gas assets on August 8, 2025, the sale of Barnwell's interest in certain oil and natural gas properties in Canada on August 28, 2025, and natural production declines in Barnwell's Twining-area wells. The U.S. oil and natural gas assets sold on August 8, 2025 contributed net production of 43,000 BOE in the three months ended June 30, 2025. The interest in certain oil and natural gas properties in Canada sold on August 28, 2025 contributed net production of 10,000 BOE in the three months ended June 30, 2025.

These decreases were partially offset by realized commodity prices increases of 3% for oil, 27% for natural gas, and 15% for NGLs compared to the prior-year period, driven by increases in the underlying benchmark prices.

The U.S. oil and natural gas assets sold on August 8, 2025 contributed oil and natural gas revenues of $1,078,000, oil and natural gas operating expenses of $389,000, depletion expense of $324,000 and impairments of $865,000 during the nine months ended June 30, 2025. The interest in certain oil and natural gas properties in Canada sold on August 28, 2025 contributed oil and natural gas revenues of $254,000, oil and natural gas operating expenses of $174,000, and depletion expense of $76,000 during the same period.

The following table sets forth Barnwell’s oil and natural gas segment operating profit before general and administrative expenses by geographic location:

(1) The operating loss for the United States for the three and nine months ended June 30, 2025 includes non-cash impairments of $200,000 and $865,000, respectively.

Oil and natural gas revenues increased $188,000 (6%) and decreased $2,139,000 (20%) for the three and nine months ended June 30, 2026, respectively, as compared with the corresponding prior-year periods. The changes were attributable to the factors discussed above.

In February 2025, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas it sold during the period from April 1, 2025 to October 31, 2025 to a fixed index price before differentials of $1.95 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices. This per day volume of natural gas under this fixed index price contract was equivalent to approximately 37% and 27% of Canadian natural gas gross production per day for the three and nine months ended June 30, 2026.

Additionally, in September 2025, the Company amended the sales price on 1,583 gross Mcf per day of the Canadian natural gas it will sell during the period from November 1, 2025 to March 31, 2026 to a fixed index price before differentials of $3.03 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices. This per day volume of natural gas under this fixed index price contract that will affect the period from November 1, 2025 to March 31, 2026, is equivalent to approximately 55% and 40% of Canadian natural gas gross production per day for the three and nine months ended June 30, 2026. These natural gas contracts were eligible for and elected as normal purchase and normal sales exception contracts and were thus excluded from derivative accounting.

In November 2025, the Company amended certain of its Canadian purchase and sales contracts to change the sales price on 1,055 gross Mcf per day of the Canadian natural gas that it sold during the period from April 1, 2026 to October 31, 2026 to a fixed index price before differentials of $2.94 Canadian dollars per Mcf, with remaining volumes continuing to be sold at spot prices. This per day volume of natural gas under this fixed index price contract that will affect the period from April 1, 2026 to October 31, 2026, is equivalent to approximately 37% and 27% of Canadian natural gas gross production per day for the three and nine months ended June 30, 2026. These natural gas contracts were eligible for and elected as normal purchase and normal sales exception contracts and were thus excluded from derivative accounting.

In June 2025, the Company amended the sales price on 100 gross barrels per day of the Canadian oil to be sold during the period from July 1, 2025 to December 31, 2025 to a fixed index price before differentials of $70.35 per net barrel, with remaining volumes continuing to be sold at spot prices. This per day volume of oil under this fixed index price contract affected the period from July 1, 2025 to December 31, 2025, is equivalent to approximately 28% and 18% of Canadian oil gross production per day for the three and nine months ended June 30, 2026.

In January 2026, the Company amended the sales price on 100 gross barrels per day of the Canadian oil to be sold during the period from February 1, 2026 to July 31, 2026 to a fixed index price before differentials of $58.20 per net barrel, with remaining volumes continuing to be sold at spot prices. This per day volume of oil under this fixed index price contract that will affect the period from February 1, 2026 to July 31, 2026, is equivalent to approximately 28% and 18% of Canadian oil gross production per day for the three and nine months ended June 30, 2026. These oil contracts were eligible for and elected as normal purchase and normal sales exception contracts and were thus excluded from derivative accounting.

In March 2026, the Company amended the sales price on 50 gross barrels per day of the Canadian oil to be sold during the period from April 1, 2026 to June 30, 2026 to a fixed index price before differentials of $89.10 per net barrel, with remaining volumes continuing to be sold at spot prices. This per day volume of oil under this fixed index price contract that will affect the period from April 1, 2026 to June 30, 2026, is equivalent to approximately 14% and 9% of Canadian oil gross production per day for the three and nine months ended June 30, 2026. These oil contracts were eligible for and elected as normal purchase and normal sales exception contracts and were thus excluded from derivative accounting.

Oil and natural gas operating expenses decreased $44,000 (2%) and $612,000 (9%) for the three and nine months ended June 30, 2026, as compared to the same periods in the prior year, primarily due to decreases in production in the current year period due to the sale of the U.S. oil and natural gas properties and the sale of Barnwell's interest in certain oil and natural gas properties in Canada discussed above.

Oil and natural gas segment depletion expense decreased $298,000 (35%) and $811,000 (32%) for the three and nine months ended June 30, 2026, as compared to the same periods in the prior year. The decrease was primarily due to decreases in production in the current year period as compared to the same periods in the prior year. These changes were primarily attributable to the factors discussed above.

On August 8, 2025, Barnwell entered into an agreement with an independent third party to sell all of its working interest in U.S. oil and natural gas assets for a sales price of $2,300,000. The sales price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date of July 1, 2025 to the closing date August 8, 2025. The U.S. oil and natural gas assets were located in the states of Texas and Oklahoma and were owned by wholly-owned subsidiaries of Barnwell. Barnwell will no longer own any oil and natural gas assets in the U.S. as a result of this sale. Operating revenues from these U.S. oil and natural gas properties represented 11% and 10% of the total oil and natural gas segment operating revenues for the three and nine months ended June 30, 2025.

Contracts to Sell Interests in Increment II

In November 2025, Kaupulehu Developments entered into an agreement with Mr. David Johnston, the son of Mr. Terry Johnston, a partner in Kaupulehu Developments, to surrender any and all remaining rights of Kaupulehu Developments for Increment II for the total consideration of $2,000,000, of which $70,000 was received in the nine months ended June 30, 2026. Additionally, the purchaser has the right to extend the closing by up to two years by making a $70,000 payment in each of the next two years, with those payments applied against the $2,000,000 purchase price. The transaction remains subject to the purchaser's election to proceed and other closing conditions.

Also in November 2025, pursuant to a unit purchase agreement, KDK agreed to sell KDK’s interests in Increment II to Mr. David Johnston for $2,109,000. The unit purchase agreement is subject to due diligence, and there is no certainty that the transaction will close. Furthermore, there is also no assurance on the timing or amounts that the general partner of KDK would distribute upon a closing.

General and Administrative Expenses

General and administrative expenses decreased $459,000 (25%) for the three months ended June 30, 2026 as compared with the prior-year period. The decrease was primarily attributable to: $759,000 reduction in professional service fees, largely reflecting lower legal, proxy solicitation, proxy advisory and public relations costs associated with the shareholder consent solicitation and proxy contest in the prior year period; $59,000 decrease in shareholder-related expenses; $39,000 decrease in office expenses, primarily related to the closure of the Company's Hawaii office on January 31, 2026; and a $21,000 decrease in expenses associated with the Pension Plan and Supplemental Executive Retirement Plan.

These decreases were offset by a $107,000 increase in share-based compensation, a $34,000 increase in directors' fees, and a $348,000 insurance recovery that was recognized in the prior-year period.

The remaining decrease in general and administrative expenses was attributable to the Company's ongoing cost-savings initiatives.

General and administrative expenses decreased $647,000 (12%) for the nine months ended June 30, 2026 as compared with the prior-year period. The decrease was primarily due to a $1,126,000 reduction in professional service fees largely reflecting lower legal, proxy solicitation, proxy advisory and public relations costs associated with the shareholder consent solicitation and proxy contest in the prior year period, net of insurance recoveries, a $43,000 decrease in office expenses, primarily related to the closure of the Company's Hawaii office on January 31, 2026, and a $38,000 decrease in shareholder-related expenses.

These decreases were partially offset by $225,000 higher salaries and wages due to bonuses and retirement payments related to the Hawaii office closure on January 31, 2026, a $200,000 increase in share-based compensation, a $63,000 increase in director's expense, $72,000 increase in expenses associated with the Pension Plan and Supplemental Executive Retirement Plan, and $45,000 increase in travel and entertainment expenses.

The remaining decrease in general and administrative expenses was attributable to the Company's ongoing cost-savings initiatives.

Depletion, Depreciation, and Amortization

Depletion, depreciation, and amortization decreased $298,000 (35%) and $803,000 (32%) for the three and nine months ended June 30, 2026, as compared to the same periods in the prior year, primarily due to decreases in production, as discussed in the “Oil and natural gas” section above.

Impairment of Assets

Under the full cost method of accounting, the Company performs quarterly oil and natural gas ceiling test calculations. Changes in the 12-month rolling average first-day-of-the-month prices for oil, natural gas and natural gas liquids prices (except where prices are defined by contractual arrangements), the value of reserve additions as compared to the amount of capital expenditures to obtain them, and changes in production rates and estimated levels of reserves, future development costs and the market value of unproved properties, impact the determination of the maximum carrying value of oil and natural gas properties.

During the three and nine months ended June 30, 2026, the Company had no impairments to oil and natural gas properties.

During the three and nine months ended June 30, 2025, the Company incurred a non-cash impairment on our U.S. oil and natural gas properties of $200,000 and $865,000.

Foreign Currency (Gain) Loss

During the three and nine months ended June 30, 2026, the Company recorded $56,000 and $67,000 in foreign currency losses, respectively, due to the effects of foreign exchange rate changes on intercompany loans and advances as a result of changes in the exchange rate between the U.S. dollar against the Canadian dollar (three and nine months ended June 30, 2025 - $219,000 foreign currency gain and $122,000 foreign currency loss, respectively). The foreign currency losses or gains from intercompany balances are included in our Condensed Consolidated Statements of Operations as the intercompany balances were not considered long-term in nature because management estimates that these intercompany balances will be settled in the future.

Equity in Income of Affiliates

Equity in income of affiliates was $376,000 and $714,000 for the three and nine months ended June 30, 2026. Equity in income of affiliates was nil for the three and nine months ended June 30, 2025.

Cash distributions of nil and $323,000 were received during the three and nine months ended June 30, 2026, respectively. Comparatively, there were no cash distributions received during the three and nine months ended June 30, 2025.

In the quarter ended June 30, 2021, the Company received cumulative distributions from the Kukio Resort Land Development Partnerships in excess of our investment balance and in accordance with applicable accounting guidance, the Company suspended its equity method earnings recognition and the Kukio Resort Land Development Partnerships investment balance was reduced to zero with the distributions received in excess of our investment balance recorded as equity in income of affiliates because the distributions are not refundable by agreement or by law and the Company is not liable for the obligations of or otherwise committed to provide financial support to the Kukio Resort Land Development Partnerships. The Company determined that it would record future equity method earnings only after our share of the Kukio Resort Land Development Partnerships’ cumulative earnings in excess of distributions during the suspended period exceeds our share of the Kukio Resort Land Development Partnerships’ income recognized for the excess distributions, and during this suspended period any distributions received would be recorded as equity in income of affiliates.

During the three months ended March 31, 2026, the Company's share of earnings from the Kukio Resort Land Development Partnerships exceeded distributions received and previously recognized excess distributions. Accordingly, the Company resumed equity-method earnings recognition during the period. For the three and nine months ended June 30, 2026, the Company recognized equity in income of affiliates only to the extent its share of net earnings exceeded cumulative excess distributions recognized during the suspended periods. As a result, $376,000 and $714,000 was recognized as equity in income from affiliates during the three and nine months ended June 30, 2026 (three and nine months ended June 30, 2025 - nil and nil), which resulted in an investment balance of $391,000 as at June 30, 2026 (nil as at September 30, 2025).

Income Taxes

Barnwell’s effective consolidated income tax rate from continuing operations, after adjusting loss from continuing operations before income taxes for non-controlling interests, was 33% and 1% for the three and nine months ended June 30, 2026 as compared to 2% and 3% for the three and nine months ended June 30, 2025.

Consolidated taxes do not bear a customary relationship to pretax results due primarily to the fact that the Company is taxed separately in Canada based on Canadian source operations and in the U.S. based on consolidated operations, and essentially all deferred tax assets, net of relevant offsetting deferred tax liabilities, are not estimated to have a future benefit as tax credits or deductions. The Company operates two subsidiaries in Canada, one of which is a U.S. corporation operating as a branch in Canada that is treated as a non-resident for Canadian tax purposes and thus has operating results that cannot be offset against or combined with the other Canadian subsidiary that files as a resident for Canadian tax purposes. Income from our non-controlling interest in the Kukio Resort Land Development Partnerships is treated as non-unitary for state of Hawaii unitary filing purposes, thus unitary Hawaii losses provide limited sheltering of such non-unitary income.

Net (Loss) Earnings Attributable to Non-controlling Interests

Earnings and losses attributable to non-controlling interests represent the non-controlling interests’ share of revenues and expenses related to the various partnerships and joint ventures in which Barnwell has controlling interests and consolidates.

Net earnings attributable to non-controlling interests totaled $37,000 and $85,000 for the three and nine months ended June 30, 2026 as compared to net loss attributable to non-controlling interests of $3,000 and $5,000 for the same periods in the prior year. The changes of $40,000 and $90,000 for the three and nine months were primarily due to the increase in the amount of equity in income of affiliates and percentage of sales revenues received in the current year periods as compared to the same period in the prior year.

Net (Loss) Earnings From Discontinued Operations

Net earnings from discontinued operations was nil during the three and nine months ended June 30, 2026 as compared to net earnings from discontinued operations of nil and $12,000 during the three and nine months ended June 30, 2025.

On March 14, 2025, the Company completed the sale of Water Resources, which represented the Company’s contract drilling segment. The financial results of the Company’s contract drilling business have been presented as discontinued operations in the condensed consolidated financial statements for all periods presented. See Note 3 “Discontinued Operations” to the Condensed Consolidated Financial Statements (unaudited) included in this report for further discussion and additional disclosures related to discontinued operations.

Liquidity and Capital Resources

The Company has presented cash flows from discontinued operations in the accompanying Condensed Consolidated Statements of Cash Flows separately after the presentation of cash flows from operating, investing, and financing activities of continuing operations. See Note 3 “Discontinued Operations” to the Condensed Consolidated Financial Statements (unaudited) included in this report for further discussion and additional disclosures related to discontinued operations. The focus of this section, “Liquidity and Capital Resources,” is on the cash flows from continuing operations, which affects future liquidity and capital resources as the Company no longer has any significant continuing involvement with the discontinued operations after the sale.

At June 30, 2026, Barnwell had a working capital surplus of $3,070,000. Barnwell’s primary sources of liquidity are cash on hand of $4,467,000 and cash flow generated by our oil and natural gas operations, as cash flow from our land investment segment, if any, are expected to be intermittent and not significant to our liquidity.

Cash Flows From Continuing Operations

Cash flows used in continuing operations totaled $3,099,000 for the nine months ended June 30, 2026, as compared to cash flows used in continuing operations of $1,163,000 for the same period in the prior year. This $1,936,000 decrease in operating cash flows was primarily due to the decrease in changes in current assets and liabilities and spending on asset retirement obligations as part of the Company's abandonment and reclamation initiatives, equity income from affiliates, and retirement plan payments relating to the SERP for retirements in the periods presented.

Cash flows provided by investing activities from continuing operations totaled $354,000 during the nine months ended June 30, 2026, as compared to cash flows used in investing activities from continuing operations of $2,235,000 during the same period of the prior year. This $2,589,000 increase in investing cash flows was due to $2,685,000 lower investments in oil and natural gas properties in the current period compared to the prior period, $323,000 distribution from equity investees received in the current period, and $163,000 in cash divested from the sale of discontinued operations, net of proceeds in the prior year period. These increases were partially offset by a $250,000 dividend received from discontinued operations and $282,000 from the sale of oil and natural gas assets in the prior year period.

Cash flows provided by financing activities from continuing operations totaled $4,346,000 for the nine months ended June 30, 2026, as compared to cash flows used in financing activities from continuing operations of $60,000 for the same period in the prior year. The $4,406,000 increase in financing cash flows was due to the November 24, 2025 private placement of 2,221,141 common shares at $1.10 per share and the At-the-Market Equity Offering Program ("ATM Program") sale of 1,810,496 common shares at an average price of $1.27 per share, which ATM Program began with the sales agreement dated February 25, 2026.

Oil and Natural Gas Capital Expenditures

Barnwell’s oil and natural gas capital expenditures, including accrued capital expenditures and excluding acquisitions and additions and revisions to estimated asset retirement obligations, totaled $9,000 and $132,000 for the three and nine months ended June 30, 2026, as compared to $385,000 and $767,000 for the same periods in the prior year.

Oil and Natural Gas Property Dispositions

There were no significant oil and natural gas property dispositions during the three and nine months ended June 30, 2026.

On August 8, 2025, Barnwell entered into an agreement with an independent third party to sell all of its working interest in U.S. oil and natural gas assets for a sales price of $2,300,000. The sales price per the agreement was adjusted for customary purchase price adjustments to reflect the economic activity from the effective date of July 1, 2025 to the closing date August 8, 2025. The U.S. oil and natural gas assets were located in the states of Texas and Oklahoma and were owned by wholly-owned subsidiaries of Barnwell. Barnwell no longer owns any oil and natural gas assets in the U.S. as a result of this sale.

On August 28, 2025, Barnwell entered into and completed a purchase and sale agreement with an independent third party and sold its interests in certain oil and natural gas properties located in the Medicine River area of Alberta, Canada. The sales price per the agreement was adjusted for customary purchase price adjustments to $288,000 in order to, among other things, reflect an economic closing date of September 30, 2025. The final determination of the customary adjustments to the purchase price was completed in the three months ended June 30, 2026 and resulted in a reduction in sales price of $16,000. The proceeds and adjustment were credited to the full cost pool, with no gain or loss recognized, as the sale did not result in a significant alteration of the relationship between capitalized costs and proved reserves.

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that information relating to Barnwell, including its consolidated subsidiaries, required to be disclosed is accumulated and communicated to Barnwell's management, including its principal executive and principal financial officers, or person performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As of June 30, 2026, an evaluation was carried out by Barnwell’s Chief Executive Officer and Chief Financial Officer of the effectiveness of Barnwell’s disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that Barnwell’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective as of June 30, 2026 to ensure that information required to be disclosed by Barnwell in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Control Over Financial Reporting

As previously disclosed, during December 2025 and January 2026, Barnwell experienced certain personnel changes within its accounting function in Canada, including one accounting team member taking short-term disability leave and two additional accounting personnel resigning on short notice. These changes occurred concurrently with the previously announced closure of the Honolulu office and the transition of accounting responsibilities to Canada, which temporarily disrupted certain normal accounting workflows.

In response, management promptly implemented mitigation measures, including the engagement of experienced accounting consultants to augment existing financial staff and complete the closing of the quarter ended December 31, 2025, and to support the continued operation of Barnwell’s accounting and financial reporting processes. These consultants possess appropriate technical expertise and experience to perform their assigned responsibilities and one has been integrated into Barnwell’s established control framework. The engagement of these accounting consultants and the related mitigation measures remained in place and continued throughout the quarter ended June 30, 2026, and the continued engagement and integration of these consultants into Barnwell’s control framework constitutes the change in Barnwell’s internal control over financial reporting during the quarter covered by this report.

Other than the continued engagement of supplemental accounting consultants as part of management’s mitigation efforts described above, there were no other changes in Barnwell’s internal control over financial reporting during the quarter ended June 30, 2026 that materially affected, or are reasonably likely to materially affect, Barnwell’s internal control over financial reporting.

Factors that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in “Part I, Item 1A. Risk Factors” in the 2025 Annual Report. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

As of the date of this Quarterly Report, there were no material changes to the risks and uncertainties described in the section titled “Risk Factors” in the 2025 Annual Report during the nine months ended June 30, 2026.