#United States #Dallas #Royalty Trust #San Juan Basin #Hilcorp

San Juan Basin Royalty Trust's Cash Distribution Update

On October 20, 2026, Argent Trust Company, acting as the trustee of the San Juan Basin Royalty Trust (NYSE: SJT), announced that there will be no cash distributions made to the holders of its units of beneficial interest for the month of October 2026. This decision stems from high production costs incurred in previous periods and persistently low natural gas prices, which have significantly affected the trust’s ability to generate income from its royalty interests.

The issue arises from cumulative excess production costs, which arise when production and capital expenditures surpass gross proceeds for a given period. Currently, these excess costs amount to approximately $12.4 million gross ($9.3 million net to the Trust), despite a decrease in the deficit of about $130,000 gross compared to the previous month. The ongoing recovery from these costs means that until they are fully settled, the Trust will not see any royalty income as all net proceeds will be allocated towards these excess costs.

Financial Details of the Trust

In August 2026, Hilcorp reported a total revenue of $4.87 million from the Subject Interests—mainly derived from gas and oil revenues totaling about $4.69 million and $180,537, respectively. During this production month, Hilcorp also billed $4.74 million in production costs. Breaking down these costs further reveals that $2.9 million were attributed to lease operating expenses, with additional figures including $317,000 for severance taxes and $1.52 million for capital costs.

Despite the revenue reported, the Trust faced challenges primarily due to low gas prices. An average gas price of $2.28 per Mcf was recorded for August 2026, representing an increase from July’s $2.01 per Mcf. This shift, albeit positive, wasn’t sufficient to bridge the gap created by the high production costs.

Administrative and Operational Expenses

For the month of October, the Trust reported administrative expenses totaling $80,118. This rise was influenced by the timing of payments and receipts related to the Trust’s operations. To manage these expenses, the Trust will utilize minimal interest income and a recent draw from a Line of Credit, which will ultimately sustain the administrative functions for the month.

Remaining funds indicate the Trust's commitment to financial sustainability while navigating through challenging market conditions. As of now, the principal on the Line of Credit stands at $1.16 million.

Future Considerations

Under the Amended and Restated Royalty Trust Indenture, the trustee holds the right to maintain cash reserves to address liabilities that are either uncertain or due later. These reserves have previously facilitated payments of accrued interest on the Line of Credit. The focus for the Trust remains on rectifying the existing balance of excess production costs and resuming distributions as soon as the financial situation allows.

In the interim, the Trust continues its thorough auditing processes alongside Hilcorp, reviewing their adherence to accounting standards regarding revenues, production costs, and more. This meticulous oversight aims to ensure compliance and address any potential discrepancies proactively.

The Trust plans to resume releasing its monthly updates through press releases via wire, ensuring that unit holders remain informed regarding its operational status. For those interested, unit holders can also receive updates directly through email by contacting the Trustee.

Conclusion

The San Juan Basin Royalty Trust faces a challenging period marked by high production costs and low gas prices that have inhibited cash distributions for October 2026. As they continue to work on resolving prior deficits and improving their financial outlook, the Trust's focus remains on sustaining transparency and consistency in its communications and operations.

For more information, investors can reach out directly to the San Juan Basin Royalty Trust through their official channels or visit their website.