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Manufacturing costs

San Juan Basin Royalty Trust Suspends Cash Distributions due to Excess Production Costs

Strategic Insights

— 2 min read

San Juan Basin Royalty Trust has announced that it will not declare a monthly cash distribution to its unit holders in May 2024 due to excess production costs and lower natural gas pricing. The trust, which holds a 24.03% net overriding royalty interest in the San Juan Basin properties, reported total revenue of $2,518,037 for the production month of May 2024. However, production costs, including lease operating expenses, capital expenditures, and severance taxes, exceeded gross proceeds by approximately $4,888,522 gross ($3,666,391 net to the trust). The trust will charge these excess production costs to the next month's distribution, resulting in no cash distributions being made by the trust until future net proceeds are sufficient to pay then-current trust liabilities and replenish cash reserves.

Key Takeaways:

  • The San Juan Basin Royalty Trust will not declare a monthly cash distribution to its unit holders in May 2024 due to excess production costs and lower natural gas pricing.
  • Excess production costs for the reporting period were primarily due to significant lease operating expenses and capital expenditures associated with Hilcorp's 2024 capital project plan.
  • Total revenue for the trust in May 2024 was $2,518,037, consisting of $2,242,475 of gas revenues and $275,562 of oil revenues.
  • Production costs, including lease operating expenses, capital expenditures, and severance taxes, exceeded gross proceeds by approximately $4,888,522 gross ($3,666,391 net to the trust).
  • The trust will charge these excess production costs to the next month's distribution, resulting in no cash distributions being made by the trust until future net proceeds are sufficient to pay then-current trust liabilities and replenish cash reserves.
  • The trust's third-party compliance auditors continue to audit payments made by Hilcorp to the trust, including sales revenues, production costs, capital expenditures, adjustments, actualizations, and recoupments.
  • The trust's auditing process has also included detailed analysis of Hilcorp's pricing and rates charged.

Statistics:

  • Total revenue for the trust in May 2024 was $2,518,037.
  • Excess production costs for the reporting period were approximately $4,888,522 gross ($3,666,391 net to the trust).
  • Gas revenues in May 2024 totaled $2,242,475.
  • Oil revenues in May 2024 totaled $275,562.
  • Gas volumes for the subject interests in May 2024 totaled 1,970,451 Mcf (2,189,390 MMBtu).
  • Average gas price for May 2024 was $1.14 per Mcf ($1.02 per MMBtu).
  • Total cash reserves as of April 30, 2024, were $1.8 million.
  • Interest income received by the trust in May 2024 was $6,482.
  • The trust's administrative expenses in May 2024 totaled $53,688.

Sources:

  • San Juan Basin Royalty Trust press release dated June [insert date], 2024 (note: no specific date provided in the original text).
  • Amended and Restated Royalty Trust Indenture, dated December 12, 2007 (as amended on February 15, 2024, by the First Amendment to the Amended and Restated Royalty Trust Indenture).
  • Website: www.sjbrt.com
  • Email: royaltytrustgroup@argenttrust.com

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