San Juan Basin Royalty Trust
SJT
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- San Juan Basin Royalty Trust (NYSE: SJT) holds a 75% net overriding royalty interest in oil and natural gas properties located in the San Juan Basin of northwestern New Mexico, encompassing approximately 119,000 net producing acres across San Juan, Rio Arriba, and Sandoval counties; the royalty functions as a net profits interest, entitling the Trust to 75% of net proceeds from production after deduction of specified production costs, lease operating expenses, severance taxes, and capital expenditures. The Trust collects monthly royalty income attributable to these subject interests, primarily consisting of working interests, royalty interests, overriding royalty interests, and other contractual rights, and distributes available net proceeds to holders of its units of beneficial interest after deducting administrative expenses and maintaining cash reserves. Primarily generating revenue from natural gas sales with minor oil contributions, the Trust serves unit holders seeking passive exposure to energy royalties without operational involvement. Established in November 1980 through a trust indenture between Southland Royalty Company and The Fort Worth National Bank, the Trust is administered by Argent Trust Company as trustee from its principal office in Houston, Texas. Hilcorp San Juan L.P. serves as the current owner and operator of most subject interests, succeeding through a series of mergers and acquisitions including Southland Royalty's merger into Burlington Resources in 1998, ConocoPhillips' acquisition of Burlington in 2006, and Hilcorp's purchase of the assets in 2017. In recent developments, Hilcorp drilled two new horizontal wells in 2024 as part of its capital project plan, resulting in excess production costs exceeding gross proceeds and leading to cumulative deficits of approximately $14.8 million gross ($11.1 million net to the Trust) as of June 2025; this has caused the application of all monthly net proceeds to cost recovery, suspending cash distributions since May 2024. To manage ongoing administrative expenses amid depleted cash reserves (from $1.8 million in April 2024 to under $33,000 by May 2025) and low natural gas prices (averaging $1.87 per Mcf in April 2025), the Trust entered a $2 million line of credit with Texas Bank on May 21, 2025, secured by a promissory note and mortgage, prioritizing repayment of excess costs, reserve replenishment to $2 million, and principal before resuming distributions. Earlier in September 2023, the Trust announced a settlement agreement and conditional trustee resignation, reflecting administrative adjustments amid production declines of 14% from 2022 to 2023 and royalty income drops to $6.9 million in 2024 from $53.2 million prior.