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

Rhea-AI Summary

San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for May 2025 due to excess production costs of approximately $15.16 million gross ($11.37 million net to Trust) from Hilcorp's drilling of two horizontal wells in 2024. For March 2025, Hilcorp reported total revenue of $6.98 million from Subject Interests, with gas revenues of $6.90 million and oil revenues of $0.08 million. Production costs were $4.99 million. Gas volumes totaled 2,448,569 Mcf at an average price of $2.82 per Mcf, down from $3.36 in February. The Trust's cash reserves have declined to $32,959, and the Trustee plans to replenish reserves to $2.0 million before future distributions. The Trust is evaluating credit options to cover administrative expenses until excess production costs are repaid.

Positive

• Net excess production costs decreased by $1.99 million gross ($1.49 million net) from previous month
• Gas production increased to 2,448,569 Mcf in March from 2,287,310 Mcf in February 2025
• Total revenue from Subject Interests reached $6.98 million for March 2025

Negative

• No cash distribution declared for May 2025 due to excess production costs
• Remaining excess production costs balance of $15.16 million gross ($11.37 million net)
• Average gas price decreased to $2.82 per Mcf from $3.36 in February 2025
• Cash reserves critically low at $32,959, down from $1.8 million in April 2024
• Trust seeking credit options to cover administrative expenses

Insights

Energy Trust Financial Analyst

SJT reports no distribution as $1.5M in proceeds go toward $11.4M production cost deficit; cash reserves critically low at $32,959.

San Juan Basin Royalty Trust (SJT) continues its distribution drought as all proceeds are being directed to pay down the substantial excess production costs deficit. The current shortfall stands at $11.37 million net to the Trust, down slightly from last month by $1.5 million. This deficit stems from Hilcorp's 2024 drilling of two horizontal wells, creating a situation where production costs exceeded gross proceeds.

The Trust's financial position is concerning. Cash reserves have been almost entirely depleted, falling to just $32,959 from $1.8 million in April 2024. The Trustee used $84,838 from reserves this month alone to cover administrative expenses. With such minimal remaining reserves, the Trustee is exploring credit options to fund ongoing administrative costs until royalty income resumes.

March 2025 production volumes showed improvement at 2,448,569 Mcf, up 7% from February. However, gas prices decreased significantly to $2.82 per Mcf, down $0.54 from February. Total revenue was $6.98 million, with production costs (excluding excess costs) at $4.99 million.

Importantly, no distributions will resume until: 1) the excess production cost balance is fully repaid, 2) Trust liabilities are satisfied, and 3) cash reserves are replenished to $2 million. The ongoing comprehensive audit of Hilcorp's accounting practices adds another layer of uncertainty to this already precarious financial situation.

DALLAS, May 19, 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 $1,499,498, 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 $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.  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 $6,984,564 of total revenue from the Subject Interests for the production month of March 2025, consisting of $6,904,591 of gas revenues and $79,973 of oil revenues.  For the Subject Interests, Hilcorp reported $4,985,233 of production costs (excluding the balance of excess production costs) for the production month of March 2025, consisting of $3,193,460 of lease operating expenses, $786,589 of severance taxes, and $1,005,184 of capital costs.

This month's Trust administrative expenses totaled $85,694. The decrease 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 $856 will be applied to cover a portion of this month's Trust administrative expenses, with cash reserves utilized to pay the remaining administrative expenses.

Based upon information provided to the Trust by Hilcorp, 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. Dividing gas revenues by production volume yielded an average gas price for March 2025 of $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.

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 April of 2025.  This month, cash reserves in the amount of $84,838 will be utilized to cover the balance of Trust administrative expenses which will bring the balance of cash reserves maintained by the Trustee to $32,959.  Prior to any future distributions to Unit Holders, the Trustee plans to replenish the cash reserves and continue to increase the cash reserves to $2.0 million. The Trustee is currently evaluating credit options on behalf of the Trust, the funds from which would be utilized to pay the Trust's administrative expenses until such time as the excess production costs are repaid and the Trust begins receiving royalty income again.

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.

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-may-2025-302458670.html

SOURCE San Juan Basin Royalty Trust

FAQ

Why did SJT stock not pay a distribution for May 2025?

SJT did not pay a distribution due to excess production costs of $15.16 million gross from Hilcorp's drilling of two horizontal wells in 2024. All net proceeds are being applied to this balance.

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

The Trust has excess production costs of $15.16 million gross, severely depleted cash reserves of $32,959, and is evaluating credit options to cover administrative expenses until royalty income resumes.

How much revenue did SJT generate in March 2025?

SJT reported total revenue of $6.98 million from Subject Interests, consisting of $6.90 million in gas revenues and $0.08 million in oil revenues.

When will SJT resume distributions to unitholders?

Distributions will resume only after excess production costs are fully paid and the Trust has sufficient funds to replenish cash reserves to $2.0 million and pay Trust liabilities.

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

Gas production was 2,448,569 Mcf at an average price of $2.82 per Mcf, down from $3.36 per Mcf in February 2025.