#USA #Dallas #Royalty Trust #San Juan Basin #Hilcorp

San Juan Basin Royalty Trust Declares No Cash Distribution for June 2025

In a recent announcement, Argent Trust Company, acting as the trustee for the San Juan Basin Royalty Trust, disclosed that no cash distribution will be made to unit holders for June 2025. This decision stems from the necessity to allocate net proceeds of $294,238, which would typically be disbursed as royalty income, towards mitigating the deficit caused by excess production costs accrued from Hilcorp San Juan L.P.'s drilling activities.

Excess production costs are incurred when operational expenses and capital investments exceed the gross proceeds within a specified timeframe. Currently, the cumulative excess production costs stand at approximately $14.77 million in gross terms, translating to roughly $11.08 million net to the Trust. Encouragingly, this represents a decrease of about $392,317 in gross costs from the previous month. Hilcorp continues to charge these excess costs against the Trust's net proceeds, essentially preventing any royalty income from flowing to the Trust until the balance is settled in full.

Data from Hilcorp indicates that total revenue for April 2025 amounted to $4.56 million, comprising mainly gas revenues of around $4.4 million and oil revenues of approximately $155,765. However, the production costs for that same month reached $4.2 million, which includes lease operating expenses, severance taxes, and capital expenses.

Gas volumes reported for the same period totaled around 2,349,703 Mcf, slightly down from March's figures, resulting in an average gas price of $1.87 per Mcf, a decrease from the previous month’s $2.82 per Mcf.

Administrative expenses for the Trust were documented at $135,339 for June, an increase attributed to the timing of various expense payments. Interest income received amounted to $394, contributing to covering part of these costs. According to the Amended Royalty Trust Indenture, the trustee holds the discretion to maintain a cash reserve for liabilities that might arise in the future. In anticipation of potential revenue shortfalls, the trustee had fortified these reserves to approximately $1.8 million by April 2024.

Furthermore, on May 21, 2025, the Trust established a line of credit worth $2 million with Texas Bank to manage ongoing administrative expenses until royalty income is sufficient to recuperate the balance of excess production costs, replenish reserves, and settle the principal amount due under the promissory note.

On June 18, 2025, cash reserves were utilized to service the interest accrued on this line of credit, bringing current reserves down to $32,747. Monthly administrative expenses are set to be covered through a combination of interest income, draws from the credit line, and residual cash reserves.

In a shift in communication strategy, starting July 21, 2025, Trust press releases will be self-published on their website rather than distributed through typical wire services, aiming to preserve cash resources as they continue to face challenges stemming from lower commodity prices and increased capital expenditures related to Hilcorp's operations.

This ongoing situation is currently subject to further scrutiny, with auditing processes in place to ensure compliance with all operational agreements while assessing any potential discrepancies in accounting and reporting. The Trust remains committed to keeping its unit holders informed through its official channels and Form 8-K filings with the SEC.

In conclusion, the San Juan Basin Royalty Trust's recent decision to forgo cash distributions is a strategic move aimed at efficiently addressing ongoing financial challenges while aiming for long-term stability. Investors and stakeholders will need to stay abreast of the Trust’s evolving financial landscape and operational results as they move forward during this turbulent period.