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PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION | 12 Months Ended
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Sep. 30, 2012
PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION |
PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION |
7. PROPERTY AND EQUIPMENT AND ASSET RETIREMENT OBLIGATION Barnwell’s property and equipment is detailed as follows:
|  |  |  |  |  | Accumulated |  |
|  |  |  |  |  | Depletion, |  |
|  | Estimated |  | Gross |  | Depreciation, |  | Net
|  | Useful |  | Property and |  | and |  | Property and
|  | Lives |  | Equipment |  | Amortization |  | Equipment
At September 30, 2012: |  |  |  |  |  |  |  |  |  |
Land |  |  |  |  | $ | 863,000 |  |  |  | $ | - |  |  |  | $ | 863,000 |
Oil and natural gas properties |  |  |  |  |  |  |  |  |  |  |  |  |  |
(full cost accounting) |  |  |  |  | 242,433,000 |  |  |  | (198,768,000 | ) |  |  | 43,665,000 |
Drilling rigs and equipment |  | 3 – 10 years |  |  | 6,752,000 |  |  |  | (5,152,000 | ) |  |  | 1,600,000 |
Offices |  | 40 years |  |  | 2,420,000 |  |  |  | (264,000 | ) |  |  | 2,156,000 |
Other property and equipment |  | 3 – 17 years |  |  | 3,685,000 |  |  |  | (3,345,000 | ) |  |  | 340,000 |
Total |  |  |  |  | $ | 256,153,000 |  |  |  | $ | (207,529,000 | ) |  |  | $ | 48,624,000 |
|  |  |  |  |  | Accumulated |  |
|  |  |  |  |  | Depletion, |  |
|  | Estimated |  | Gross |  | Depreciation, |  | Net
|  | Useful |  | Property and |  | and |  | Property and
|  | Lives |  | Equipment |  | Amortization |  | Equipment
At September 30, 2011: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Land |  |  |  |  | $ | 863,000 |  |  |  | $ | - |  |  |  | $ | 863,000 |
Oil and natural gas properties (full cost accounting) |  |  |  |  | 224,852,000 |  |  |  | (175,715,000 | ) |  |  | 49,137,000 |
Drilling rigs and equipment |  | 3 – 10 years |  |  | 7,020,000 |  |  |  | (4,988,000 | ) |  |  | 2,032,000 |
Offices |  | 40 years |  |  | 2,420,000 |  |  |  | (203,000 | ) |  |  | 2,217,000 |
Other property and equipment |  | 3 – 17 years |  |  | 3,881,000 |  |  |  | (3,511,000 | ) |  |  | 370,000 |
Total |  |  |  |  | $ | 239,036,000 |  |  |  | $ | (184,417,000 | ) |  |  | $ | 54,619,000 |
Under the full cost method of accounting, we are required to perform quarterly ceiling test calculations. Barnwell’s net capitalized costs exceeded the ceiling limitation at September 30, 2012. As such, Barnwell reduced the carrying value of its oil and natural gas properties by $2,551,000 during the year ended September 30, 2012. No such reduction was necessary during fiscal 2011. The reduction is included in the Consolidated Statements of Operations under the caption “Reduction of carrying value of assets.” Based on the impact of first-day-of-the-month oil, natural gas and natural gas liquids prices during the first quarter of fiscal 2013 on the 12-month average first-day-of-the-month trailing prices used in the calculation of the ceiling limitation, the Company may be required to record a reduction in carrying value of its oil and natural gas properties in its first quarter of fiscal 2013. The Company is unable to estimate a range of the amount of the potential reduction in carrying value as other variables that potentially impact the ceiling limitation are dependent upon results of activity during the first quarter of fiscal 2013, which is not yet complete as of the date of this filing. Barnwell recognizes the fair value of a liability for an asset retirement obligation in the period in which it is incurred if a reasonable estimate of fair value can be made. The following is a reconciliation of the asset retirement obligation:
|  | Year ended September 30, |
|  | 2012 |  |  |  | 2011 |
Asset retirement obligation as of beginning of year |  | $ | 4,921,000 |  |  |  | $ | 4,869,000 |
Obligations incurred on new wells drilled |  | 68,000 |  |  |  | 123,000 |
Revision of estimated obligation |  | 320,000 |  |  |  | (330,000 | )
Accretion expense |  | 363,000 |  |  |  | 341,000 |
Payments |  | (324,000 | ) |  |  | (36,000 | )
Foreign currency translation adjustment |  | 281,000 |  |  |  | (46,000 | )
Asset retirement obligation as of end of year |  | $ | 5,629,000 |  |  |  | $ | 4,921,000 |

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- Definition Represents the entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale and includes the disclosure for an asset retirement obligation. + References No definition available. + Details
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