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

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

The San Juan Basin Royalty Trust, managed by Argent Trust Company, recently announced a significant development regarding its cash distributions. For the month of February 2025, the Trust will not be distributing any cash payments to its Unit Holders. This decision comes as a direct consequence of higher-than-expected production costs coupled with persistently low natural gas prices.

The Trust's assessment indicates that excess production costs have impeded the ability to declare a cash distribution. These excess costs arise when the total expenses linked to production exceed the revenues generated during a given period. In particular, for December 2024, Hilcorp San Juan L.P., which operates the interests overseen by the Trust, reported considerable operational expenses. The company recorded total revenue of $8,687,779 from the Trust's interests, including $8,390,577 from gas and $297,202 from oil revenue. Notably, the operating costs associated with production totaled $6,459,217, which included significant lease operating expenses and capital costs.

In detail, the production costs highlighted include $2,751,758 in lease operating expenses, $825,059 in severance taxes, and $2,882,401 in capital expenditures. This provided a snapshot of the financial pressures facing the Trust and its unit holders. The cumulative excess production costs have now reached approximately $27,278,204 gross, indicating an ongoing financial strain on the Trust's operations.

Furthermore, the Trust's administrative expenses have also seen a rise, totaling $141,887 for the month, influenced by the timing of income and payment outflows. To assist in managing these costs, the Trust allocated interest income of $2,703.69 towards these expenses, with cash reserves being tapped to cover the remaining balance.

Moreover, Hilcorp revealed that production volumes for December 2024 reached 2,669,858 Mcf, showcasing a robust increase from November's total of 2,261,819 Mcf. This shift contributed considerably to the Trust's financial landscape, especially as it reflects an average gas price uplift from $2.10 per Mcf in November to $3.14 per Mcf in December.

Looking ahead, Hilcorp has submitted a detailed capital project plan for 2025, with an estimated budget of around $9 million. This plan involves 29 distinct projects, focusing primarily on new drilling, recompletions, and facility enhancements aimed at optimizing performance and managing production costs. Notably, around $4 million from the budget will be allocated to seven vertical drill projects.

Overall, the Trust remains in a challenging position, trying to balance both operational costs and the ongoing market fluctuations in gas prices. As they continue discussions with Hilcorp regarding the ongoing assessment and auditing of financial transactions, future distributions will not take place until there is a significant turnaround in net proceeds to cover the Trust's liabilities and rebuild financial reserves. The emphasis remains on ensuring the long-term sustainability of the Trust while addressing the immediate financial hurdles presented by operational costs.

This situation serves as a reminder of the fluctuations and unpredictabilities within the energy sector, which can significantly impact the revenues and cash flow of investment trusts like the San Juan Basin Royalty Trust. Investors and stakeholders are urged to remain engaged with developments as they unfold, particularly with the forthcoming project plans and any shifts in market conditions that may allow for future distributions to Unit Holders.