San Juan Basin Royalty Trust Halts Cash Distribution Due to Excess Production Costs

Strategic Insights -

The San Juan Basin Royalty Trust has announced that it will not declare a monthly cash distribution to its unit holders due to the application of net proceeds to cover excess production costs incurred by Hilcorp San Juan L.P. in 2024. The excess production costs, which currently total approximately $15,160,257 gross ($11,370,193 net to the Trust), have resulted from the drilling of two new horizontal wells. The Trust will not receive royalty income until the excess production costs are paid in full.

Key Takeaways:

  • The San Juan Basin Royalty Trust will not declare a monthly cash distribution due to excess production costs incurred by Hilcorp San Juan L.P. in 2024, which total approximately $15,160,257 gross ($11,370,193 net to the Trust).
  • The excess production costs resulted from the drilling of two new horizontal wells, and the Trust will not receive royalty income until the costs are paid in full.
  • Hilcorp will continue to charge the balance of excess production costs to the Trust's net proceeds each month.
  • The Trustee plans to replenish the cash reserves to $2.0 million and is currently evaluating credit options on behalf of the Trust.
  • The Trust's auditing process has included detailed analysis of Hilcorp's pricing and rates charged, and the Trust's consultant continues to engage with Hilcorp regarding its ongoing accounting and reporting to the Trust.
  • Gas volumes for the Subject Interests for March 2025 totaled 2,448,569 Mcf (2,720,632 MMBtu), with an average gas price of $2.82 per Mcf ($2.54 per MMBtu).
  • Total revenue from the Subject Interests for the production month of March 2025 was $6,984,564, consisting of $6,904,591 of gas revenues and $79,973 of oil revenues.
  • Excess production costs for the Subject Interests for March 2025 totaled $4,985,233, consisting of $3,193,460 of lease operating expenses, $786,589 of severance taxes, and $1,005,184 of capital costs.

Statistics:

  • Excess production costs: $15,160,257 gross ($11,370,193 net to the Trust)
  • Gas volumes for the Subject Interests for March 2025: 2,448,569 Mcf (2,720,632 MMBtu)
  • Average gas price for March 2025: $2.82 per Mcf ($2.54 per MMBtu)
  • Total revenue from the Subject Interests for the production month of March 2025: $6,984,564
  • Excess production costs for the Subject Interests for March 2025: $4,985,233
  • Lease operating expenses for the Subject Interests for March 2025: $3,193,460
  • Severance taxes for the Subject Interests for March 2025: $786,589
  • Capital costs for the Subject Interests for March 2025: $1,005,184
  • Administrative expenses for the Trust for March 2025: $85,694

Sources:

  • "San Juan Basin Royalty Trust Reports Monthly Cash Distribution" (Source not specified)
  • "Argent Trust Company, as the trustee (the 'Trustee') of the San Juan Basin Royalty Trust (the 'Trust') (NYSE: SJT), today reported" (Source not specified)
  • "as disclosed in the Trust's filings, these revenues and costs (along with all costs) are the subject of the Trust's ongoing comprehensive audit process by the Trust's professional consultants and outside counsel" (Source not specified)