# TO OUR STOCKHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/AMEX_BRN_2017/AMEX_BRN_2017.mmd` · pages 2-8_

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TO OUR STOCKHOLDERS:

Most significantly, our 2017 year began with Mr. Morton H. Kinzler resigning as Chief Executive Officer effective December 31, 2016. Mr. M. Kinzler served as CEO for over 45 years, was the longest serving CEO in the Company's history and ended his tenure by resigning as Chairman of the Board of Directors effective September 30, 2017 and becoming Chairman Emeritus of the Board October 1, 2017. The Board as a whole wishes to acknowledge his leadership and many contributions to the Company for a period of over six decades, from the time prior to the Company's incorporation to the present day. The Board elected Mr. James S. Barnwell III Chairman of the Board effective October 1, 2017. Mr. Jim Barnwell, part of the Barnwell family which founded the Company, is a highly qualified, well-respected businessman who will provide excellent leadership to the Company.

Barnwell's net earnings for fiscal 2017 were \(1,171,000 (\)0.14 per share), as compared to a net loss of \(3,615,000 (\)0.44 per share) in fiscal 2016. This \(4,786,000 improvement in the Company's bottom line in one year was predominantly due to 1) a \)2,093,000 increase in land investment segment operating profit due to a \(2,500,000 payment received from the Kukio Resort, KD II land development partnership whereas last year there was no such payment and 2) in the current year the Company had a \)527,000 gain on the sale of its New York office while last year we had a \(1,154,000 impairment of our oil and natural gas properties due to low oil prices, whereas the only impairment in the current year was \)155,000 related to the residential lot held for sale. Also, and of significant note, in fiscal 2017 both our oil and natural gas and contract drilling segments had operating profits, before general and administrative expenses, while in fiscal 2016 they both had operating losses.

Of notable importance in fiscal 2017 was the continued success of our investments in Kukio Resort, made only four years ago in fiscal 2014, as we saw the sale of one lot for \(20,975,000 by the Kukio Resort land development partnerships in which the Company indirectly owns a 19.6% non-controlling ownership interest. This sale did not cause a significant fluctuation from fiscal 2016 as there was the sale of one lot for \)20,000,000 by the Kukio Resort land development partnerships in the first quarter of fiscal 2016. However, the sale of a second lot enabled Kukio Resort land development partnerships to make the \(2,500,000 payment noted above. As a result of the successes of the Kukio Resort land development partnerships, the Company has received just over \)8,500,000 in distributions in fiscal 2017 and 2016.

As mentioned above, oil and natural gas operating profits increased in fiscal 2017 as compared to fiscal 2016 as oil and natural gas prices increased 26% and 56%, respectively, or \(8.30 per barrel and \)0.71 per MCF (thousand cubic feet), and oil and natural gas operating expenses and depletion both decreased as compared to fiscal 2016.

The Company continues to take steps to reduce its general and administrative expenses including closing and selling its New York Office this fiscal 2017 and last year's sale of the second of two luxury homes developed by the Company which resulted in \(5,700,000 in revenues in fiscal 2016.

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We believe that the Company is moving in the right direction after several years of low oil and gas prices. Our balance sheet is much stronger than it was several years ago, even as we have sold assets and paid off our debt. We intend to reinvest our cash to acquire additional producing assets and oil acreage, as well as to pursue other investment opportunities, however, the timing and amount of any future re-investment is dependent on the need to fund ongoing operating and general and administrative expenses and asset retirement obligations.

This year's results and our repayment of the last of our bank debt last year has the Company leaving fiscal 2017 with \(20,694,000 in cash, cash equivalents and certificates of deposit and working capital of \)20,344,000 at September 30, 2017 which positions the Company for a positive start to fiscal 2018. This cash provides us with both a challenge and an opportunity as we move forward and seek appropriate investments.

We thank you, our stockholders, for your continued support.

For the Board of Directors,

![](images/3_0.jpg)

James S. Barnwell III

Chairman of the Board

![](images/3_1.jpg)

Alexander C. Kinzler
Chief Executive Officer,
President and Director