Barnwell Industries: Navigating Activist Storms to Secure Value Creation

Julian CruzFriday, May 16, 2025 11:16 pm ET
15min read

Amid a bruising proxy battle, Barnwell Industries (BRN) has emerged with a strengthened governance structure and renewed focus on core assets, positioning it as a compelling contrarian investment. The rejection of Sherwood Group’s full-control bid—backed by proxy advisors and shareholders—signals a pivotal shift toward stability. Combined with cost discipline and strategic asset sales, Barnwell is now primed to capitalize on its underappreciated Alberta energy assets while reducing activist-related volatility.

Governance Triumph: A Balanced Board, A Stable Future

The Sherwood Group’s aggressive bid to seize control of Barnwell unraveled under scrutiny from key proxy advisors and shareholders. Both Glass Lewis and ISS rejected the activist’s all-or-nothing approach, instead endorsing a measured governance overhaul. Shareholders voted to remove Alex Kinzler, the embattled CEO, while electing Heather Isidoro, a seasoned oil and gas executive from the Sherwood slate. This outcome struck a critical balance: retaining institutional knowledge (via directors like Ken Grossman and Joshua Horowitz) while introducing fresh expertise (Isidoro).

The split decision reflects investor skepticism toward Sherwood’s lack of a credible operational plan. As ISS noted, the activist group failed to present a “coherent strategy” beyond criticizing management—a flaw that diluted its appeal. Barnwell’s management, meanwhile, underscored its long-term focus on shareholder value preservation, emphasizing operational discipline and asset optimization.

Cost Discipline: Cutting Fat, Preserving Value

Barnwell’s financial struggles—net losses of $1.5M in Q2 2025—have been exacerbated by proxy contest costs ($978K in legal fees alone). Yet the company has made strategic moves to streamline operations:
- SG&A Cuts: General and administrative expenses were slashed by 20% year-over-year, excluding proxy-related costs.
- Asset Sales: The $1.05M sale of its Water Resources subsidiary, while resulting in a $193K loss, freed capital for core energy plays.
- Hawaii Land Strategy: While current sales are paused, Barnwell retains 420 developable acres in Hawaii’s Kukio Resort, valued at ultra-premium rates. These holdings, with high barriers to entry, offer a future liquidity backstop.

The company’s focus on trimming non-core expenses and monetizing non-essential assets signals a return to fundamentals—a stark contrast to Sherwood’s disruptive agenda.

Alberta’s Hidden Upside: The Energy Play Ignored by the Market

Barnwell’s Alberta oil and gas assets remain underappreciated by the market. With global energy prices stabilizing and North American shale supply tightening, these holdings could deliver outsized returns. Key advantages include:
- Low-Cost Production: Alberta’s infrastructure maturity positions Barnwell to capitalize on rising crude prices.
- Regulatory Tailwinds: Canada’s commitment to energy-sector modernization aligns with Barnwell’s exploration plans.

Why BRN is a Contrarian Buy Now

  1. Stabilized Governance: Shareholder support for a balanced board reduces the risk of further activist distraction.
  2. Liquidity Safeguards: Hawaii land sales (when restarted) and Alberta production could bolster cash flow.
  3. Undervalued Energy Assets: BRN’s stock trades at 30% below its 5-year average P/B ratio, ignoring Alberta’s potential.
  4. Cost Efficiency: SG&A cuts and asset sales signal a management team focused on survival and growth.

Risks and Mitigants

  • Near-Term Liquidity: The $1.4M cash balance is precarious. However, Barnwell’s Hawaii holdings and Alberta reserves provide collateral for debt financing.
  • Regulatory Hurdles: Alberta’s permitting processes can delay projects, but the company’s long-standing presence there mitigates this risk.

Conclusion: A Turnaround in Disguise

Barnwell’s governance reset and strategic focus on core assets position it to rebound strongly. With activist noise fading and a stabilized board, the company is now free to execute on its $500M+ Alberta resource opportunity. Investors who act now—before the market recognizes Barnwell’s value—could secure outsized gains as the energy cycle turns.

Action Item: Buy BRN at current prices. Monitor for catalysts like Alberta production ramp-ups or Hawaii land sale announcements.

The road to recovery is paved with disciplined execution—and Barnwell is finally on the right path.