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San Juan Basin Royalty Trust Operational and Financial Update

On September 28, 2026, Argent Trust Company, acting as the trustee for the San Juan Basin Royalty Trust, provided a detailed update addressing inquiries from the trust's Unit Holders. The Trust aims to ensure that all affiliated parties within the investment landscape are kept informed, highlighting operational aspects, financial statuses, and projections for future performance. This communication supplement's information already discussed in the Trust's filings with the Securities and Exchange Commission (SEC), which Unit Holders are encouraged to consult for comprehensive insights.

Administrative Expenses

In the recent update, the Trustee has detailed administrative costs affecting the Trust, specifically noting trustee fees and other related-party transactions. In response to inquiries, starting from the third-quarter report ending September 30, 2026, there will be a more granular breakdown of administrative expenses categorized by trustee fees, legal costs, accounting, and investor communication expenses.

Remarkably, a $976,000 year-over-year reduction in these expenses is largely credited to the transition from PNC Bank to Argent Trust in 2024. This transition involved significant transition-related costs which are not anticipated to recur in the future. Additionally, the Trustee has absorbed many interim roles from previous consultants, eliminating ongoing consulting fees. Furthermore, the Trustee has replaced a consultant previously involved in Sarbanes-Oxley (SOX) compliance testing, leading to additional cost savings.

Joint Interest Audit Adjustments

The Trustee confirmed the inheritance of a near-complete 2017–2020 joint interest audit process from PNC Bank, which continued seamlessly following the transition. The audit team, in collaboration with Hilcorp, continuously evaluated findings. After thorough discussions with both Hilcorp and PNC Bank, the Trustee asserted that the cost of further disputes regarding this audit outweighed potential recovery benefits, leading them to cap their actions at the adjustments reported in the Trust's financial statements.

The royalty auditor has consistently checked Hilcorp's financial interactions with the Trust, while the Trustee plans to maintain stringent oversight moving forward. To bolster this process, a new royalty auditor was appointed to add an extra layer of scrutiny.

Hilcorp’s Capital Expenditures and Trust’s Authorizations

Hilcorp operates as the primary developer under the arrangements that govern the Trust’s overriding royalty interests, a role that limits both the Trustee's and Unit Holders' capacities to influence or veto expenditure decisions. Regular reports and communications from Hilcorp keep the Trustee informed about development projects and associated costs, ensuring that expenditures align with prudent practices dictated by their guiding agreements.

The Trust continues to assess how Hilcorp's spending affects natural gas selling prices, particularly under the stipulations of the Trust's founding documents.

Financial Liquidity and Credit Facilities

Crucially, the San Juan Basin Royalty Trust has established a $2,000,000 credit facility with Texas Bank, which is set to mature on May 21, 2027. Presently, approximately $1,075,400 of this line is outstanding as of September 18, 2026, prompting discussions between the Trustee and the bank regarding possible extensions or new arrangements. The Trustee remains open to other sources of financing and emphasizes the importance of ongoing communication with Unit Holders about any financing decisions.

The material terms surrounding the credit facility have already been disclosed in Forms 8-K and subsequent 10-Q and 10-K filings, and the Trustee pledges to keep Unit Holders informed about liquidity positions and credit status leading up to the maturity date.

Enhanced Investor Communications

In a move to increase transparency, the Trustee will resume the distribution of national newswire press releases as part of its communication strategy. This decision responds to the need for timely and effective information dissemination among Unit Holders, potential investors, analysts, and media outlets. Alongside ongoing communication via their website and existing email lists, this initiative aims to ensure all stakeholders have equitable access to updates and important Trust announcements.

Conclusion

The San Juan Basin Royalty Trust has made significant strides in its operations and financial management under the stewardship of Argent Trust Company. With a robust strategy to optimize administrative expenses, maintain stringent oversight of audits, and ensure superior communication with investors, the Trust sets a firm foundation for potential growth and stability moving forward. The recent updates illustrate a commitment to transparency and responsible management, essential for cultivating trust and confidence among Unit Holders and the broader financial community.