Barnwell investor urges key changes in company

An investor who nearly doubled his stake in Hono­lulu-based Barnwell Industries Inc. over the past year to become one of the company’s top shareholders is now asking Barnwell executives to remove the firm’s octogenarian chief executive officer and impose a mandatory retirement age for Barnwell directors.

Ned Sherwood, who controls more than 10 percent of Barnwell’s outstanding shares, said he decided to take his concerns public after private discussions with the company’s board of directors didn’t yield any results. Sherwood outlined his recommendations in a letter to top Barnwell executives that he also filed with the Securities and Exchange Commission.

Sherwood, who bought his first shares of Barnwell in 2004, said he has continued investing in the company despite wide swings in the stock price that have resulted in capital losses for him. Barnwell’s main sources of revenue are oil and natural gas development in Canada, and residental real estate investments on Hawaii island.

"Notwithstanding my poor investment results, I have recently increased my shareholdings in Barnwell to greater than 10 percent of the outstanding shares, and I believe Barnwell’s future results should improve from this point if the company takes the proper steps to maximize shareholder returns," Sherwood wrote in the letter dated June 11.

Sherwood’s first of three recommendations outlined in the letter was for the company to force the retirement of CEO Morton Kinzler.

"Morton is 87 years old and has earned total compensation in the last three years according to the proxy statement of $829,160, $960,939 and $755,495 respectively. Additionally, I understand Morton is a Florida resident and maintains residences in the New York metropolitan area, in each case thousands of miles away from the company’s main headquarters in Hawaii or oil and gas operations in Canada," Sherwood wrote.

He also noted that Barnwell’s current share price is on par with the $3.60 it traded for on a split-adjusted basis in 1989.

"Therefore, while Morton basks in seeming retirement with near-million-dollar compensation, the shareholders have experienced no appreciation in 23 1/2 years. This does not seem proper to me," Sherwood wrote.

He also noted that five of Barnwell’s directors, including Kinzler, range in age from 69 to 89, with three over the age of 80.

"I propose a mandatory retirement age for Barnwell directors of 65, or 70 at maximum, effective immediately. I believe this change would result in a more responsive board," he wrote.

Sherwood also recommended that Barnwell sell an apartment the company owns in New York City, which he estimated to be valued at as much as $4 million.

Barnwell Chief Financial Officer Russell Gifford said the company received the letter from Sherwood, but did not respond.

Separately, Barnwell on Friday reported a net loss of $1.23 million, or 15 cents a share, in the April-to-June quarter. That compared with a net loss of a net loss of $1.37 million, or 17 cents a share, a year earlier.

The company said it was able to narrow the loss in part because of an increase in commodity prices that benefited the company’s oil and natural gas operations in Canada.

Gains in the company’s oil and natural gas business were partly offset by an increase in administrative expenses and decreases in revenue from land investment and contract drilling, according to a news release from the company.

Barnwell shares were unchanged at $3.51 Friday on the New York Stock Exchange. The stock has traded in a range of $2.92 to $3.89 over the past 52 weeks.