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San Juan Basin Royalty Trust Fails to Distribute Royalty Income Due to Excess Production Costs

Strategic Insights

— 2 min read

The San Juan Basin Royalty Trust (the "Trust") announced that it will not declare a monthly cash distribution to its Unit Holders due to the application of net proceeds to the balance of excess production costs. Excess production costs occur when production costs and capital expenditures exceed the gross proceeds for a certain period. The balance of cumulative excess production costs is currently approximately $15,160,257 gross ($11,370,193 net to the Trust), a decrease in the deficit of $1,999,331 gross ($1,499,498 net to the trust) from last month's reporting period.

Key Takeaways:

  • The Trust will not declare a monthly cash distribution due to the application of net proceeds to the balance of excess production costs, totaling $15,160,257 gross ($11,370,193 net to the Trust).
  • The Trust's administrative expenses totaled $85,694 this month, with interest income of $856 applied to cover a portion of the expenses, while cash reserves were utilized to pay the remaining administrative expenses.
  • Gas volumes for the Subject Interests for March 2025 totaled 2,448,569 Mcf (2,720,632 MMBtu), as compared to 2,287,310 Mcf (2,541,456 MMBtu) for February 2025.
  • The average gas price for March 2025 was $2.82 per Mcf ($2.54 per MMBtu), a decrease of $0.54 per Mcf ($0.48 per MMBtu) as compared to the average gas price for February 2025 of $3.36 per Mcf ($3.02 per MMBtu).
  • The Trustee is authorized to retain a cash reserve for payment of Trust liabilities, which was increased in March and April 2024, such that total cash reserves were $1.8 million as of April 30, 2024.
  • The Trustee plans to replenish the cash reserves and continue to increase them to $2.0 million before making any future distributions to Unit Holders.
  • The Trustee is evaluating credit options on behalf of the Trust to pay the Trust's administrative expenses until the excess production costs are repaid and the Trust begins receiving royalty income again.

Statistics:

  • $15,160,257: The current balance of cumulative excess production costs (gross).
  • $11,370,193: The current balance of cumulative excess production costs (net to the Trust).
  • $1,999,331: The decrease in the deficit of excess production costs (gross) from last month's reporting period.
  • $1,499,498: The decrease in the deficit of excess production costs (net to the Trust) from last month's reporting period.
  • $6,984,564: Total revenue from the Subject Interests for the production month of March 2025.
  • $4,985,233: Production costs (excluding the balance of excess production costs) for the production month of March 2025.
  • $2,448,569 Mcf: Gas volumes for the Subject Interests for March 2025.
  • $2,720,632 MMBtu: Total gas volumes for the Subject Interests for March 2025.
  • $3.36 per Mcf: Average gas price for February 2025.
  • $2.82 per Mcf: Average gas price for March 2025.
  • $1.8 million: Total cash reserves as of April 30, 2024.
  • $2.0 million: The Trustee's target for the Trust's cash reserves.

Sources:

  • Argent Trust Company (as the trustee of the San Juan Basin Royalty Trust)
  • Hilcorp San Juan L.P.
  • The 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)
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