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

No Cash Distribution for December 2024

In a recent announcement from Argent Trust Company, the trustee for the San Juan Basin Royalty Trust, it was revealed that there will be no cash distribution to unit holders for December 2024. This decision stems from the excess production costs that surpassed the gross proceeds for the Trust's interests in the operational month of October 2024, alongside persistently low prices of natural gas.

Production Costs Breakdown

During the production month of October, Hilcorp San Juan L.P. reported a total revenue of $3.67 million from these interests, comprised of approximately $3.60 million in natural gas revenues and around $72,330 in oil revenues. However, production costs reached an alarming $7.06 million for the same period, indicating that expenses were significantly higher than earnings. The operational expenses included over $2.46 million in lease operational costs, over $327,000 in severance taxes, and about $4.26 million related to capital costs.

As a result of these financial dynamics, Hilcorp outlined approximately $21.25 million in excess production costs to be deferred to future distributions. The Trust confirmed that they will not distribute any cash until net proceeds are adequate to cover Trust liabilities and replenish reserves that had previously been diminished by high operating costs and capital expenditures.

Administrative Expenses and Cash Reserves

In terms of administrative expenses for the Trust, it totaled $204,336 this month. The rise in expenses was attributed to various factors, including timing discrepancies in the receipts and payments. To mitigate these expenses, the Trust received $3,689 in interest income which will offset part of the administrative costs, while remaining costs will be funded from existing cash reserves.

As of April 30, 2024, the cash reserves had been bolstered to $1.8 million, thanks to prior increases initiated by the Trustee to cushion against revenue shortfalls. As cash reserves diminished to $760,919 after covering this month's administrative expenses, the Trustee plans to bolster these reserves to $2 million before considering any cash distributions to Unit Holders in the future.

Market Conditions and Future Outlook

Gas volumes associated with the Trust's interests maintained a positive trend, with a reported total of 1,880,071 Mcf for October compared to 1,869,291 Mcf in September. The pricing environment also saw some improvement, with the average gas price climbing to $1.92 per Mcf compared to $1.42 per Mcf in the previous month.

The trustee emphasizes the adherence to a set of guidelines preventing cash distributions during periods of revenue shortfall. This situation reflects the ongoing effects of low commodity prices and mounting operational expenditures tied to Hilcorp's 2024 capital project plan.

The Trust is also engaging in consistent dialogue with Hilcorp about accounting practices and the accuracy of reported revenues and costs. Enhanced auditing measures have been put in place, and comprehensive analyses of pricing and expenditure rates will continue to be conducted to ensure compliance with Trust agreements.

Forward-Looking Statements

This announcement contains forward-looking statements regarding future expectations and results. A myriad of risks and uncertainties includes oil and gas price fluctuations, regulatory changes, litigation risks, and uncertainty regarding reserve estimates, which may lead to results differing significantly from these projections. Investors are encouraged to review the Trust's reports for detailed insights on risk factors.

For additional inquiries or insights regarding the San Juan Basin Royalty Trust's financial activities, stakeholders can reach out to Argent Trust Company for more information.