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

Rhea-AI Summary

San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution to unitholders for June 2025 due to ongoing excess production costs of approximately $14.77M gross ($11.08M net). The Trust must apply all net proceeds to cover these costs from Hilcorp's two horizontal wells drilled in 2024. For April 2025, Hilcorp reported total revenue of $4.56M from Subject Interests, with gas revenues of $4.40M and oil revenues of $0.16M. Gas production volumes decreased to 2.35M Mcf with average gas price dropping to $1.87 per Mcf. The Trust's cash reserves have depleted to $32,747, leading to the establishment of a $2M line of credit with Texas Bank. The Trust will self-publish press releases on its website starting July 21, 2025, due to financial constraints.

Positive

• None.

Negative

• No cash distribution to unitholders for June 2025
• Significant excess production costs of $14.77M gross remain to be paid
• Gas price decreased by $0.95 per Mcf compared to previous month
• Cash reserves severely depleted to just $32,747
• Trust forced to take $2M line of credit to cover administrative expenses
• Gas production volumes declined from 2.45M Mcf to 2.35M Mcf

Insights

Energy Finance Specialist

SJT's financial situation remains dire with no distribution, $11M in excess costs, depleted reserves, and dependence on a credit line.

San Juan Basin Royalty Trust continues to face severe financial challenges, reporting that it will not make any cash distribution to unitholders for June 2025. This marks a continued period of no distributions as the Trust struggles with a significant burden of excess production costs.

The Trust currently faces approximately $14.8 million gross ($11.1 million net) in excess production costs stemming from Hilcorp's drilling of two horizontal wells in 2024. While the deficit decreased by $294,238 from the previous month, this reduction is insufficient to enable distributions to resume in the near term.

Cash reserves have been almost completely depleted, dwindling to just $32,747 as of May 31, 2025, forcing the Trust to establish a $2 million line of credit with Texas Bank in May 2025. The Trust is now using this credit line to fund its administrative expenses, drawing $132,851 this month alone.

April 2025 production data shows declining gas prices, with average gas price dropping to $1.87 per Mcf, a $0.95 decrease from March's $2.82. Production volumes also declined to 2.35 million Mcf from 2.45 million Mcf in March. This price and volume decline compounds the Trust's financial distress.

The Trust has now taken additional cost-cutting measures, including discontinuing wire distribution of press releases and relying on self-publishing on its website. Distributions will not resume until the Trust can repay excess production costs, replenish a $2 million reserve, and repay its line of credit obligations.

DALLAS, June 20, 2025 /PRNewswire/ -- Argent Trust Company, as the trustee (the "Trustee") of the San Juan Basin Royalty Trust (the "Trust") (NYSE: SJT), today reported that it will not declare a monthly cash distribution to the holders of its Units of beneficial interest (the "Unit Holders") due to the application of net proceeds of $294,238, which amount would otherwise be payable to the Trust as royalty income, to the balance of excess production costs accrued as a result of Hilcorp San Juan L.P.'s ("Hilcorp") drilling of two new horizonal wells in 2024. 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 $14,767,940 gross ($11,075,955 net to the Trust), a decrease in the deficit of $392,317 gross ($294,238 net to the trust) from last month's reporting period.  Hilcorp will continue to charge the balance of excess production costs to the Trust's net proceeds each month. Until the balance is paid in full, the Trust will not receive royalty income as all net proceeds will be applied to the balance of excess production costs.  No cash distributions will be made by the Trust until future net proceeds are sufficient to pay Trust liabilities and replenish cash reserves. 

Hilcorp reported $4,558,987 of total revenue from the Subject Interests for the production month of April 2025, consisting of $4,403,222 of gas revenues and $155,765 of oil revenues.  For the Subject Interests, Hilcorp reported $4,201,917 of production costs (excluding the balance of excess production costs) for the production month of April 2025, consisting of $2,510,928 of lease operating expenses, $568,685 of severance taxes, and $1,122,304 of capital costs.

Based upon information provided to the Trust by Hilcorp, gas volumes for the Subject Interests for April 2025 totaled 2,349,703 Mcf (2,610,782 MMBtu), as compared to 2,448,569 Mcf (2,720,632 MMBtu) for March 2025. Dividing gas revenues by production volume yielded an average gas price for April 2025 of $1.87 per Mcf ($1.69 per MMBtu), a decrease of $0.95 per Mcf ($0.85 per MMBtu) as compared to the average gas price for March 2025 of $2.82 per Mcf ($2.54 per MMBtu).

This month's Trust administrative expenses totaled $135,339. The increase in administrative expenses was attributable to differences in timing of the receipt and payment of certain expenses by the Trust.  Interest income received by the Trust in the amount of $394 will be applied to cover a portion of this month's Trust administrative expenses.

Pursuant to 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), the Trustee is authorized to retain, in its sole discretion, a cash reserve for payment of Trust liabilities that are contingent or uncertain or otherwise not currently due and payable. To cover Trust expenses during any period of revenue shortfall, which has resulted and may continue to result from lower commodity prices and increased capital expenditures and lease operating expenses under Hilcorp's 2024 capital project plan for the Subject Interests, the Trustee increased the cash reserves in March and April of 2024, such that total cash reserves were $1.8 million as of April 30, 2024.  Interest income and cash reserves were utilized to pay Trust administrative expenses each month from May 2024 through May of 2025.  As of May 31, 2025, the balance of cash reserves maintained by the Trustee was $32,959.

On May 21, 2025, the Trust entered into a promissory note (the "Note") to establish a line of credit (the "Line of Credit") in the amount of $2,000,000 with Texas Bank, together with a mortgage to secure that Note. The Line of Credit is intended to cover the Trust's administrative expenses until the Trust receives royalty income in amounts sufficient to (a) repay the balance of excess production costs accrued as a result of Hilcorp San Juan L.P.'s drilling of two new horizonal wells in 2024, (b) replenish a reserve in the amount of $2,000,000, and (c) repay the principal due under the Note, after which time, the Trust will resume distributions of the net profits income to the holders of the Trust's units of beneficial interest.

On June 18, 2025, cash reserves in the amount of $212 were utilized to pay interest accrued on the Line of Credit, such that the balance of cash reserves maintained by the trust is $32,747.

Interest income in the amount of $394, a draw of $132,851 from the Trust's Line of Credit at Texas Bank, and $1883 of cash reserves remaining from an over withdrawal of funds from the reserves in April 2025 will be used to pay Trust administrative expenses for the month of June.

Production from the Subject Interests continues to be gathered, processed, and sold under market sensitive and customary agreements, as recommended for approval by the Trust's Consultant.  The Trustee continues to engage with Hilcorp regarding its ongoing accounting and reporting to the Trust, and the Trust's third-party compliance auditors continue to audit payments made by Hilcorp to the Trust, inclusive of 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.  As previously 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 to analyze compliance with all the underlying operative Trust agreements and evaluate potential remedies in the event there is suspected non-compliance.

As of July 21, 2025, the Trust will self-publish press releases on its website, www.sjbrt.com, and the release will not be included in any wire distribution, which has been the normal procedure for each monthly press release through June 20, 2025. The self-publication is due to the depletion of the Trust's cash reserves and conservation of the line of credit resources.  The trust will self-publish press releases until such time as the cash reserves have been replenished and increased to $2.0 million.  The Trust will continue to furnish unitholders with information through its website and Form 8-K filings with the Securities and Exchange Commission, which are available at www.sec.gov.

Forward Looking Statements. Except for historical information contained in this news release, the statements in this news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements generally are accompanied by words such as "estimates," "anticipates," "could," "plan," or other words that convey the uncertainty of future events or outcomes.  Forward-looking statements and the business prospects of San Juan Basin Royalty Trust are subject to a number of risks and uncertainties that may cause actual results in future periods to differ materially from the forward-looking statements. These risks and uncertainties include, among other things, certain information provided to the Trust by Hilcorp, volatility of oil and gas prices, governmental regulation or action, litigation, and uncertainties about estimates of reserves. These and other risks are described in the Trust's reports and other filings with the Securities and Exchange Commission.

Contact: San Juan Basin Royalty Trust
               Argent Trust Company, Trustee
               Nancy Willis, Director of Royalty Trust Services
               Toll-free: (855) 588-7839
               Fax: (214) 559-7010
               Website: www.sjbrt.com
               Email: trustee@sjbrt.com 

View original content:https://www.prnewswire.com/news-releases/san-juan-basin-royalty-trust-declares-no-cash-distribution-for-june-2025-302486720.html

SOURCE San Juan Basin Royalty Trust

FAQ

Why is SJT not paying a distribution for June 2025?

SJT is not paying a distribution because all net proceeds must be applied to cover excess production costs of $14.77M gross from Hilcorp's two horizontal wells drilled in 2024.

What is the current financial status of San Juan Basin Royalty Trust?

The Trust has depleted cash reserves of $32,747, excess production costs of $14.77M gross, and has established a $2M line of credit with Texas Bank to cover administrative expenses.

How much are SJT's excess production costs and when will they be paid off?

The excess production costs are approximately $14.77M gross ($11.08M net to the Trust). Distributions will resume only after these costs are paid and cash reserves are replenished.

What was SJT's gas production and pricing for April 2025?

Gas production was 2.35M Mcf at an average price of $1.87 per Mcf, down from 2.45M Mcf and $2.82 per Mcf in March 2025.

How will SJT communicate with unitholders after July 21, 2025?

SJT will self-publish press releases on its website www.sjbrt.com and through SEC Form 8-K filings instead of wire distributions to conserve resources.