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

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

On May 19, 2025, Argent Trust Company, acting as the trustee of the San Juan Basin Royalty Trust (NYSE: SJT), made a significant announcement: there will be no cash distribution declared for the Unit Holders for the month of May. This decision results from the application of net proceeds, amounting to $1,499,498, which are allocated to cover excess production costs incurred following Hilcorp San Juan L.P.'s drilling of two horizontal wells last year.

Excess production costs arise when the project costs and capital expenditures surpass the gross revenues realized during a specific period. Currently, the cumulative balance of excess production costs stands at approximately $15,160,257 gross ($11,370,193 net to the Trust). This reflects a decrease of $1,999,331 gross ($1,499,498 net) in deficit from the previous month's figures. Until this balance is settled, the Trust will not generate royalty income since all net proceeds will be directed toward covering these production costs.

For March 2025, Hilcorp reported that the total revenue from the Subject Interests reached $6,984,564, which includes $6,904,591 from gas revenues and $79,973 from oil revenues. However, production costs, excluding the aforementioned excess production costs, amounted to $4,985,233. This included lease operating expenses of $3,193,460, severance taxes of $786,589, and capital costs of $1,005,184.

Additionally, the Trust incurred administrative expenses totaling $85,694 for the month, attributed to variations in the timing of expense recognition and payments. Interest income of $856 will partially offset these expenses, while cash reserves will cover the remainder.

In comparing gas volumes from March 2025 to February 2025, gas throughput increased to 2,448,569 Mcf (2,720,632 MMBtu), slightly up from 2,287,310 Mcf (2,541,456 MMBtu). Despite this increase, the average gas price saw a decline, with values plummeting to $2.82 per Mcf ($2.54 per MMBtu), a drop of $0.54 per Mcf ($0.48 per MMBtu) compared to the preceding month, which experienced an average of $3.36 per Mcf ($3.02 per MMBtu).

The Amended and Restated Royalty Trust Indenture dated December 12, 2007, permits the trustee to maintain a cash reserve to manage Trust liabilities, especially in times of uncertain revenue or increased costs, like those experienced under Hilcorp's 2024 capital project. As of April 30, 2024, cash reserves accumulated to $1.8 million, which have been used to cover necessary administrative expenditures since May 2024.

For May 2025, the trustee anticipates utilizing $84,838 from these reserves to settle outstanding administrative costs, resulting in a remaining reserve of $32,959. Notably, any future distributions to Unit Holders will be contingent on replenishing cash reserves to $2 million.

The trustee is also exploring credit options to ensure Trust funds can cover administrative expenses until excess production costs are cleared and regular royalty income resumes.

Currently, production from the Subject Interests is being processed under standard market agreements, and the trustee is in ongoing discussions with Hilcorp about accuracy in accounting and reporting practices. The Trust's external compliance auditors continue to perform rigorous audits on payments including revenues and costs incurred, as mandated by the Trust's operating agreements.

It’s crucial to note that the forthcoming statements represent forward-looking insights made in accordance with the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These outlooks are subject to uncertainties and risks that could lead to actual results diverging from projected outcomes. Relevant details regarding these risks can be found in the Trust's filings with the SEC.

For more information, Unit Holders can contact Argent Trust Company directly or visit the Trust's official website.