SAN JUAN BASIN ROYALTY TRUST
For the period ended Mar 31, 2025. Filed May 15, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 15, 2025
SJT$3.21+6.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0000950170-24-126805
Item 2. Trustee’s Discu ssion and Analysis of Financial Condition and Results of Operations. OverviewCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-15.
0000950170-25-072172
Item 2. Trustee’s Discu ssion and Analysis of Financial Condition and Results of Operations. OverviewThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 77 previous paragraphs and 74 current paragraphs.
43 unchanged; 25 reworded; 5 added; 7 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 4 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (5)
Current report
Excess Production Costs. Excess Production Costs (“Excess Production Costs”) occur when Production Costs (including capital expenditures and lease operating expenses) exceed the Gross Proceeds for a certain period. In 2024, Excess Production Costs accrued due to significant lease operating expenses and capital expenditures associated with Hilcorp San Juan L.P. (“Hilcorp”) drilling of two new horizonal wells in 2024. As of December 31, 2024, the balance of Excess Production Costs was $21,248,008 gross ($15,936,006 net to the Trust). As of March 31, 2025, the balance of Excess Production Costs was $21,739,947 ($16,304,960 net to the Trust). Hilcorp will not pay Royalty Income to the Trust, and no cash distributions will be made by the Trust until the balance of Excess Production Costs is extinguished. Further, no cash distribution will be made by the Trust until all Trust liabilities are paid in full, and the Trust’s cash reserves are replenished.
Current report
In each of the months from May 2024 through March 2025, the Trust did not receive any Royalty Income, and interest income received was insufficient to pay Trust liabilities. Since the Trust did not receive Royalty Income from Hilcorp and interest income was insufficient to pay the Trust’s liabilities during the period from May 2024 through March 2025, the Trust was able to use cash reserves to pay the Trust’s liabilities. The Trust expects to continue to draw on cash reserves for all Trust liabilities not covered by interest income until such time as the Trust begins receiving Royalty Income again. The Trust is permitted to borrow funds against the Royalty to cover the Trust’s operating expenses until such time as the Trust extinguishes the balance of Excess Production Costs incurred in 2024 and 2025 and receives sufficient Royalty Income to replenish cash reserves. As of March 31, 2025, the balance of cash reserves held by the Trust to cover Trust liabilities was $258,521.
Current report
The anticipated deficit in income to pay the Trust’s liabilities described above raises substantial doubt about the Trust’s ability to continue as a going concern within one year after issuance date of the financial statements. The Trustee, on behalf of the Trust, is currently negotiating a commercial line of credit to cover the Trust’s liabilities once cash reserves are depleted.
Current report
The accompanying financial statements have been prepared assuming that the Trust will continue as a going concern; however, the above conditions raise substantial doubt about the Trust’s ability to do so. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Trust be unable to continue as a going concern.
Current report
Oil production volumes increased for the Subject Interests and Royalty by 2,528 Bbls (41.5%) and 41 Bbls (11.4%), respectively for the three months ended March 31, 2025, as compared to the same period in 2024. These changes generally resulted from changes in demand and market conditions.
Removed paragraphs (7)
Previous report
Gross Proceeds and Severance Tax Estimates. Hilcorp transitioned to a new accounting system in 2021. During and immediately following the transition period, revenue and severance taxes on the distributions to the Trust were estimated. Then, in 2021 and 2022, various adjustments were made to reconcile actual revenue and severance taxes to the previously reported estimates. Hilcorp conducted a process review of the new accounting system that included review of production volume allocations for 2017 through 2020 and resulted in reallocations of affected volumes for many of the Trust properties.
Previous report
Through the Trustee’s audit process, certain exceptions to the several different categories of expenses (specifically offsite labor, overhead, operator-owned compressors and saltwater disposal facilities) for the years 2017 through 2020 were identified that the Trustee believed resulted in an underpayment of royalties owed to the Trust for those years. The Trustee engaged in extensive discussions with Hilcorp regarding these exceptions that culminated in Hilcorp’s payment of the sum of $1,037,093.45, which included the accumulated interest incurred as a result of the underpayment. The audit settlement payment was included in the September 2023 distribution to Unit Holders.
Previous report
Revenue comprised of a compliance audit settlement payment and related interest for the 2017 through 2020 disputed expenses audit.
Previous report
Revenue related to compliance audit exceptions and associated interest.
Previous report
Revenue included an audit settlement payment in February 2023 and related interest for the 2017 through 2020 disputed expenses audit and audit exceptions.
Previous report
In each of July, August, and September 2024, the Trust did not receive any Royalty Income, and interest income received was insufficient to pay Trust liabilities. In the event the Trust does not receive Royalty Income from Hilcorp and interest income sufficient to pay its liabilities in future months, which is expected to occur given the significantly increased expenditures anticipated in Hilcorp's 2024 Plan, the Trust will continue to draw upon the cash reserves, and if needed, may borrow funds against the Royalty to cover the Trust’s operating expenses until such time as the Trust's cash reserve can be replenished from subsequent Royalty Income payments from Hilcorp.
Previous report
Oil production volumes decreased for the Subject Interests by 6,181 Bbls (35.7%) for the three months ended September 30, 2024, as compared to the same period in 2023. Oil production volumes decreased for the Royalty by 5,565 Bbls (46.3%) for the three months ended September 30, 2024, as compared to the same period in 2023. For the nine months ended September 30, 2024, oil production volume decreased by 6,247 Bbls (19.5%) for the Subject Interests and 6,087 Bbls (28.6%) for the Royalty as compared to the same period in 2023. These changes generally resulted from changes in the demand for natural gas during the applicable time periods, natural gas inventory levels, availability of market conditions, and an increase in capital spending to generate production from new and existing wells.
Reworded paragraphs (25)
Previous wording
(855) 588-7839). Argent Trust Company, as successor trustee of the Trust, is subject to the terms and conditions of the Indenture. The defined term “Trustee” as used herein shall refer to PNC Bank (which maintains its offices at 2200 Post Oak Blvd., Floor 18, Houston, TX 77056) for periods from October 8, 2021, until February 14, 2024, and shall refer to Argent Trust Company (which maintains its offices at 3838 Oak Lawn Ave, Suite 1720, Dallas, Texas 75219) for periods on and after February 15, 2024.
Current wording
PNC Bank, National Association (“PNC Bank”), served as the previous Trustee of the Trust from October 8, 2021, through February 14, 2024. Effective February 15, 2024, Argent Trust Company, a Tennessee chartered trust company (“Argent”), became the Trustee of the Trust. The principal office of the Trust is 3838 Oak Lawn Avenue, Suite 1720, Dallas, Texas 75219 (telephone number (855) 588-7839). Argent Trust Company, as successor trustee of the Trust, is subject to the terms and conditions of the Indenture. The defined term “Trustee” as used herein shall refer to PNC Bank (which maintains its offices at 2200 Post Oak Blvd., Floor 18, Houston, TX 77056) for periods from October 8, 2021, until February 14, 2024, and shall refer to Argent Trust Company (which maintains its offices at 3838 Oak Lawn Ave, Suite 1720, Dallas, Texas 75219) for periods on and after February 15, 2024.
Previous wording
Since the transition to Hilcorp’s new accounting system in 2021, the Trustee has engaged and continues to engage with Hilcorp on an ongoing basis regarding Hilcorp’s accounting and reporting to the Trust. 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 analyses 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 professional consultants and outside counsel to help evaluate compliance with the underlying operative Trust agreements and evaluate potential remedies in the event there is suspected non-compliance.
Current wording
Gross Proceeds and Severance Tax Estimates. The Trustee has engaged and continues to engage with Hilcorp on an ongoing basis regarding Hilcorp’s accounting and reporting to the Trust. 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 analyses 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 professional consultants and outside counsel to help evaluate compliance with the underlying operative Trust agreements and evaluate potential remedies in the event there is suspected non-compliance.
Previous wording
On February 16, 2024, the Trust announced that Hilcorp had provided the Trust with its 2024 capital project plan for the Subject Interests (the “2024 Plan”), and Hilcorp has estimated its 2024 capital expenditures for the Subject Interests to be $36.0 million. This plan was updated on March 6, 2024, with a reduction of approximately $2.0 million, bringing the total estimate of 2024 capital expenditures to $34.0 million.
Current wording
On February 13, 2025, the Trust announced that Hilcorp had provided the Trust with its 2025 capital project plan for the Subject Interests (the “2025 Plan”), and Hilcorp has estimated its 2025 capital expenditures for the Subject Interests to be approximately $9.0 million. As of March 31, 2025, Hilcorp has spent $1.25 million of the $9.0 million budgeted under the 2025 Plan.
Previous wording
Hilcorp informed the Trust that its 2024 Plan will allocate approximately $25.0 million of the 2024 Plan’s budget toward two drilling projects in the Mancos formation. Approximately $8.0 million of the 2024 Plan’s budget will be allocated to 36 well recompletions and workovers scheduled to be completed in the Mesaverde and Fruitland Coal formations. Approximately $1.0 million of the 2024 Plan’s budget will be allocated to facilities projects related to natural gas compression. Hilcorp further informed the Trust that its planned project status for 2024 is subject to revision if Hilcorp revises its assumptions underlying the 2024 Plan, in which event the actual capital costs may vary from these estimates. Hilcorp advised the Trustee that there were ten workover wells completed, two new wells in progress, and 11 workover wells in progress during the nine months ended September 30, 2024.
Current wording
Hilcorp informed the Trust that its 2025 Plan for the Subject Interests includes 29 projects. Approximately $4.0 million of the $9.0 million budget in the 2025 Plan will be allocated to seven new vertical drill projects, all completed in the Dakota/Mesa Verde formations. Approximately $4.5 million of the $9.0 million budget will be allocated to 22 projects for recompletions and workovers in the Fruitland Coal formation, and approximately $0.5 million of the $9.0 million budget will be allocated to facilities projects related to natural gas compression and other facility projects. Hilcorp further informed the Trust that its planned project status for 2025 is subject to revision if Hilcorp revises its assumptions underlying the 2025 Plan, and that actual capital costs may vary from these estimates. Hilcorp advised the Trustee that there were nine workover wells completed, four new wells completed, and one workover well in progress during the three months ended March 31, 2025.
Previous wording
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have impacted and continue to impact Net Proceeds. Hilcorp’s capital expenditures increased for the three months and nine months ended September 30, 2024, by approximately $10,450,220 and $12,115,022, respectively. The increases in capital costs for the periods were primarily attributable to a substantially higher capital project spending budget for Hilcorp's 2024 Plan as compared to 2023.
Current wording
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have impacted and continue to impact Net Proceeds. Hilcorp’s capital expenditures increased approximately $13,056,566, from $990,794 for the three months ended March 31, 2024 to $14,047,360 for the three months ended March 31, 2025. The increase in capital costs for the period was primarily attributable to a substantially higher capital project spending budget for Hilcorp's drilling of two new horizontal wells in 2024.
Previous wording
Results of Operations – for the Three and Nine Months Ended September 30, 2024 and 2023
Current wording
Results of Operations – for the Three Months Ended March 31, 2025 and 2024
Previous wording
Royalty Income. Royalty Income consists of 75% of the monthly Net Proceeds attributable to the Royalty. Royalty Income for the three and nine months ended September 30, 2024, and 2023 was determined as shown in the following table:
Current wording
Royalty Income. Royalty Income consists of 75% of the monthly Net Proceeds attributable to the Royalty. Royalty Income for the three months ended March 31, 2025, and 2024 was determined as shown in the following table:
Previous wording
Production Costs exceeded Gross Proceeds by $10,294,620 for the three months ended September 30, 2024, and by $11,517,368 for the nine months ended September 30, 2024. The Conveyance provides that any excess production costs applicable to the Subject Interests over Gross Proceeds from such properties must be recovered from future Net Proceeds before Royalty Income is again paid to the Trust. The Trust is not obligated to reimburse Hilcorp for any excess Production Costs if future Gross Proceeds from the Subject Interests are insufficient to cover such costs.
Current wording
Production Costs exceeded Gross Proceeds by $491,938 for the three months ended March 31, 2025. The Conveyance provides that Excess Production Costs must be recovered from future Net Proceeds before Royalty Income is again paid to the Trust. The Trust is not obligated to reimburse Hilcorp for any excess Production Costs if future Gross Proceeds from the Subject Interests are insufficient to cover such costs. The balance of Excess Production Costs as of March 31, 2025 was $21,739,946 gross ($16,304,960 net to the Trust).
Previous wording
The Royalty Income distributed to the Trust for the three and nine months ended September 30, 2024, was lower than that distributed during the same periods of 2023, due primarily to substantially higher capital project spending associated with Hilcorp's 2024 Plan. Additionally, Royalty Income was affected by a decline in natural gas prices and an increase in production costs, including capital expenditures and lease operating expenses. The average natural gas price decreased from $2.04 per Mcf for the three months ended September 30, 2023, to $1.49 per Mcf for the three months ended September 30, 2024. The average natural gas price decreased from $5.42 per Mcf for the nine months ended September 30, 2023 to $2.20 per Mcf for the nine months ended September 30, 2024. Production of natural gas from the Subject Interests decreased from 5,989,625 Mcf for the three months ended September 30, 2023, to 5,691,025 Mcf for the three months ended September 30, 2024. Production of natural gas from the Subject Interests also decreased slightly from 17,466,457 Mcf for the nine months ended September 30, 2023 to 16,743,796 Mcf for the nine months ended September 30, 2024.
Current wording
There was no Royalty Income distributed to the Trust for the three months ended March 31, 2025, due primarily to substantially higher capital project spending associated with Hilcorp's drilling of two new horizontal wells in 2024. Royalty Income of $5,091,060 was distributed in the three months ending March 31, 2024. Additionally, Royalty Income was affected by a decline in natural gas prices and an increase in production costs, including capital expenditures and lease operating expenses. The average natural gas price decreased from $3.19 per Mcf for the three months ended March 31, 2024, to $2.99 per Mcf for the three months ended March 31, 2025. Production of natural gas from the Subject Interests increased from 5,595,016 Mcf for the three months ended March 31, 2024, to 7,620,893 Mcf for the three months ended March 31, 2025.
Previous wording
Gross Proceeds from Subject Interests. Total Gross Proceeds decreased approximately $5.4 million, or 36.8%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. Total Gross Proceeds decreased approximately $59.5 million or 60.5% for the nine months ended September 30, 2024 compared to the same time period in 2023. The decreases were primarily due to lower natural gas prices and lower production volumes.
Current wording
Gross Proceeds from Subject Interests. Total Gross Proceeds increased approximately $5.5 million, or 30.1%, for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The increases were primarily due to increased production volumes due to the two new horizontal wells Hilcorp drilled in 2024.
Previous wording
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have and will continue to impact Net Proceeds. Hilcorp's capital expenditures increased approximately $10,450,220 for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, and increased approximately $12,115,022 for the nine months ended September 30, 2024, compared to the same time period in 2023. The increase in capital costs in the three-month and nine-month periods were primarily attributable to the significantly higher capital project spending budget for Hilcorp's 2024 Plan (as defined below), as compared to the same periods in 2023.
Current wording
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have impacted and will continue to impact Net Proceeds. Hilcorp's capital expenditures increased approximately $13,056,566, from $990,794 for the three months ended March 31, 2024 to $14,047,360 for the three months ended March 31, 2025. The increase in capital costs in the three-month period was primarily attributable to Hilcorp's significantly higher capital project spending related to drilling two new horizontal wells in 2024.
Previous wording
On February 16, 2024, the Trust announced that Hilcorp had provided the Trust with its 2024 capital project plan for the Subject Interests (the “2024 Plan”), and Hilcorp has estimated its 2024 capital expenditures for the Subject Interests to be $36.0 million. This 2024 Plan was updated on March 6, 2024, with a reduction of approximately $2.0 million, bringing the total estimate of 2024 capital expenditures to $34.0 million. Hilcorp informed the Trust that its 2024 Plan will allocate approximately $25.0 million of the 2024 Plan’s budget toward two drilling projects in the Mancos formation. Approximately $8.0 million of the 2024 Plan’s budget will be allocated to 36 well recompletions and workovers scheduled to be completed in the Mesaverde and Fruitland Coal formations. Approximately $1.0 million of the 2024 Plan’s budget will be allocated to facilities projects related to natural gas compression. Hilcorp further informed the Trust that its planned project status for 2024 is subject to revision if Hilcorp revises its assumptions underlying the 2024 Plan, in which event the actual capital costs may vary from these estimates. Hilcorp informed the Trustee that there were ten workover wells completed, two new wells in progress, and 11 workover wells in progress during the nine months ended September 30, 2024.
Current wording
Hilcorp informed the Trust that its 2025 Plan for the Subject Interests includes 29 projects. Approximately $4.0 million of the $9.0 million budget in the 2025 Plan will be allocated to seven new vertical drill projects, all completed in the Dakota/Mesa Verde formations. Approximately $4.5 million of the $9.0 million budget will be allocated to 22 projects for recompletions and workovers in the Fruitland Coal formation, and approximately $0.5 million of the $9.0 million budget will be allocated to facilities projects related to natural gas compression and other facility projects. Hilcorp further informed the Trust that its planned project status for 2025 is subject to revision if Hilcorp revises its assumptions underlying the 2025 Plan, and that actual capital costs may vary from these estimates. As of March 31, 2025, Hilcorp has spent $1.25 million of the $9.0 million budgeted under the 2025 Plan.
Previous wording
Severance Taxes. Aggregate severance taxes decreased approximately $0.8 million, or 42%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 and decreased approximately $6.5 million or 57% for the nine months ended September 30, 2024 compared to the same time period during 2023. The decrease was primarily attributable to lower Gross Proceeds. Severance taxes represented approximately 12% of Gross Proceeds for the three months ended September 30, 2024 compared to approximately 15% for the same period of 2023. Severance taxes represented approximately 13% of Gross Proceeds for the nine months ended September 30, 2024 and approximately 12% for the same period of 2023.
Current wording
Severance Taxes. Aggregate severance taxes decreased approximately $0.2 million, or 9%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was primarily attributable to the decrease in the price of gas. Severance taxes represented approximately 9% of Gross Proceeds for the three months ended March 31, 2025 compared to approximately 13% for the same period of 2024.
Previous wording
Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes increased $1.0 million or 15.7%, for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. For the nine months ended September 30, 2024, lease operating expenses and property taxes increased approximately $2.8 million or 13.9% compared to the nine months ended September 30, 2023. As previously disclosed in the Trust’s filings, these costs (along with all revenue and costs) are the subject of the Trust’s ongoing comprehensive compliance audit process by professional consultants and outside counsel to help evaluate compliance with the underlying operative Trust agreements and evaluate potential remedies in the event there is suspected non-compliance.
Current wording
Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes decreased $0.07 million or 0.9%, for the three months ended March 31, 2025 compared to the three months ended March 31, 2024.
Previous wording
Excess Production Costs. For the three and nine months ended September 30, 2024, Production Costs exceeded Gross Proceeds by $10,294,620 ($7,720,965 net to the Trust) and $11,517,368 ($8,638,026 net to the Trust), respectively. The cumulative balance of excess Production Costs as of September 30, 2024, was $11,517,368 ($8,638,026 net to the Trust). There were no excess Production Costs for the three and nine months ended September 30, 2023, and there was no cumulative balance of excess Production Costs as of September 30, 2023. The Conveyance provides that any excess Production Costs applicable to the Subject Interests over the amount of Gross Proceeds from such properties must be recovered from future Net Proceeds before Royalty Income is again paid to the Trust. The Trust is not obligated to reimburse Hilcorp for any excess Production Costs if future Gross Proceeds from the Subject Interests are insufficient to cover such costs. As such, the cumulative balance of excess Production Costs as of September 30, 2024, is to be recovered in future periods when the Gross Proceeds exceed Production Costs for such period.
Current wording
Excess Production Costs. For the three months ended March 31, 2025, Production Costs exceeded Gross Proceeds by $491,938. The cumulative balance of Excess Production Costs as of March 31, 2025, was $21,739,946 gross ($16,304,960 net to the Trust). The Conveyance provides that any Excess Production Costs applicable to the Subject Interests over the amount of Gross Proceeds from such properties must be recovered from future Net Proceeds before Royalty Income is again paid to the Trust. The Trust is not obligated to reimburse Hilcorp for any excess Production Costs if future Gross Proceeds from the Subject Interests are insufficient to cover such costs. As such, the cumulative balance of Excess Production Costs as of March 31, 2025, is to be recovered in future periods when the Gross Proceeds exceed Production Costs for such period.
Previous wording
Distributable Income. Distributable Income for the three and nine months ended September 30, 2024, and 2023 was determined as shown in the following table:
Current wording
Distributable Income. Distributable Income for the three months ended March 31, 2025, and 2024 was determined as shown in the following table:
Previous wording
There was no Distributable Income for the three months ended September 30, 2024. This was a decrease from $3.9 million ($0.084685 per Unit) for the three months ended September 30, 2023. Distributable income decreased approximately 89% from $48.0 million (1.029974 per Unit) for the nine months ended September 30, 2023 to $5.2 million ($0.110670 per Unit) for the same period in 2024. The decrease in Distributable Income was primarily attributable to significantly increased capital expenditures and a sharp decline in natural gas prices.
Current wording
There was no Distributable Income for the three months ended March 31, 2025. This was a decrease from $4.1 million ($0.087806 per Unit) in Distributable Income for the three months ended March 31, 2024. The decrease in Distributable Income was primarily attributable to significantly increased capital expenditures and a sharp decline in natural gas prices.
Previous wording
Interest Income. Interest income decreased for the three and nine months ended September 30, 2024, as compared to the same periods in 2023 primarily due to the decrease in Royalty Income.
Current wording
Interest Income. Interest income decreased for the three months ended March 31, 2025, as compared to the same periods in 2024 primarily due to the lack of Royalty Income and the reduction in cash reserves held by the Trustee.
Previous wording
General&Administrative Expenses. General and administrative expenses decreased slightly by $6,255 (2%) for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. For the nine months ended September 30, 2024, general and administrative expenses increased by $792,057 (57.8%) compared to the nine months ended September 30, 2023 due to differences in timing of the receipt and payment of certain expenses by the Trust, as well as expenses in the first half of 2024 associated with the transition to Argent Bank as Trustee of the Trust.
Current wording
General&Administrative Expenses. General and administrative expenses decreased by $505,541 (50%) for the three months ended March 31, 2025 compared to the three months ended March 31, 2024. The decrease was due to differences in timing of the receipt and payment of certain expenses by the Trust, as well as expenses in the first half of 2024 associated with the transition to Argent Bank as Trustee of the Trust.
Previous wording
Cash Reserves. Total cash reserves were $1,099,699 as of September 30, 2024. The Trustee is authorized to determine, in its discretion, the amount of cash reserves needed to cover liabilities and contingencies of the Trust. The Trustee previously maintained a cash reserve in the amount of $1,000,000. However, to cover Trust Expenses during any period of revenue shortfall, which has resulted and could continue to result from lower commodity prices or increased capital expenditures under Hilcorp's 2024 project plan for the Subject Interests, the Trustee increased the cash reserves in March and April of 2024, such that total cash reserves were $1,800,000 as of April 30, 2024. Cash reserves of $700,581, along with interest income, were utilized to pay the balance of Trust administrative expenses remaining (after applying interest income) each month from May through September 2024, when the Trust did not receive any Royalty Income. Prior to any distributions to Unitholders, the Trustee plans to replenish the cash reserves and continue to increase the cash reserves to $2,000,000.
Current wording
Cash Reserves. Total cash reserves were $258,521 as of March 31, 2025. The Trustee is authorized to determine, in its discretion, the amount of cash reserves needed to cover liabilities and contingencies of the Trust. The Trustee previously maintained a cash reserve in the amount of $1,000,000. However, to cover Trust Expenses during any period of revenue shortfall, which has resulted and could continue to result from lower commodity prices or increased capital expenditures under Hilcorp's 2024 project plan for the Subject Interests, the Trustee increased the cash reserves in March and April of 2024, such that total cash reserves were $1,800,000 as of April 30, 2024. Cash reserves of $1,541,479, along with interest income, were utilized to pay the balance of Trust administrative expenses remaining (after applying interest income) each month from May 2024 through March 2025, when the Trust did not receive any Royalty Income. Prior to any distributions to Unitholders, the Trustee plans to replenish the cash reserves and continue to increase the cash reserves to $2,000,000.
Previous wording
The Trust’s principal source of liquidity and capital is Royalty Income. The Trust’s distribution of income to Unit Holders is funded by Royalty Income after payment of Trust expenses. The Trust is not liable for any Production Costs or liabilities attributable to the Royalty. If at any time the Trust receives more than the amount due under the Royalty, it is not obligated to return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance. If the Trustee determines that the Trust does not have sufficient funds to pay its liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full. The Trustee may not sell or dispose of any part of the assets of the Trust without the affirmative vote of the Unit Holders of 75% of all of the Units outstanding; however, the Trustee may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any 12-month period without the consent of the Unit Holders.
Current wording
The Trust’s principal source of liquidity and capital is Royalty Income. The Trust’s distribution of income to Unit Holders is funded by Royalty Income after payment of Trust expenses. The Trust is not liable for any production costs or liabilities attributable to the Royalty. If at any time the Trust receives more than the amount due under the Royalty, it is not obligated to return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance. If the Trustee determines that the Trust does not have sufficient funds to pay its liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full. The Trustee may not sell or dispose of any part of the assets of the Trust without the affirmative vote of the Unit Holders of 75% of all the Units outstanding; however, the Trustee may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any 12-month period without the consent of the Unit Holders.
Previous wording
Royalty Income for the three months ended September 30, 2024, is associated with natural gas and oil production during the period from May 2024 through July 2024. Royalty Income for the nine months ended September 30, 2024, is associated with natural gas and oil production from the Subject Interests during the period from November 2023 through July 2024.
Current wording
Royalty Income for the three months ended March 31, 2025, is associated with natural gas and oil production during the period from November 2024 through January 2025. Royalty Income for the three months ended March 31, 2024, is associated with natural gas and oil production from the Subject Interests during the period from November 2023 through January 2024.
Previous wording
Natural gas production volumes decreased for the Subject Interests and the Royalty by 298,600 Mcf (5.0%) and 8,110,010 Mcf (568.6%), respectively for the three months ended September 30, 2024, as compared to the same period in 2023. For the nine months ended September 30, 2024, natural gas production volumes decreased 722,661 Mcf (4.1%) for the Subject Interests and 12,769,823 Mcf (173.2%) for the Royalty compared to the same periods in 2023. Royalty volume is calculated using a formula determined by revenue less expenses. Excess production costs contributed to negative volumes for gas for the Royalty. The decrease in production volume was also affected by a natural decline in the producing properties, market conditions, and a decrease in demand. Natural gas production is also influenced by the line pressure of the natural gas gathering systems in the San Juan Basin.
Current wording
Natural gas production volumes increased for the Subject Interests by 2,025,877 Mcf (36%) and decreased for the Royalty by 3,353,837 (194%), respectively for the three months ended March 31, 2025, as compared to the same period in 2024. Royalty volume is calculated using a formula determined by revenue less expenses. Excess production costs contributed to negative volumes for gas for the Royalty. The increase in production volume for the Subject Interests is attributed to the two new horizontal wells that Hilcorp drilled in 2024. Natural gas production is also influenced by the line pressure of the natural gas gathering systems in the San Juan Basin.
Previous wording
The average realized natural gas price per Mcf decreased for the three and nine months ended September 30, 2024, as compared to the same periods in 2023. This decrease was primarily due to a decrease in the El Paso Natural Gas Company, San Juan Basin Index pricing.
Current wording
The average realized natural gas price per Mcf decreased for the three months ended March 31, 2025, as compared to the same periods in 2024. This decrease was primarily due to a decrease in the El Paso Natural Gas Company, San Juan Basin Index pricing.
Previous wording
The average realized oil price per Bbl increased for the three and nine months ended September 30, 2024 as compared to the same periods in 2023. This increase was primarily due to an increase in the WTI benchmark oil price.
Current wording
The average realized oil price per Bbl increased for the three months ended March 31, 2025 as compared to the same periods in 2024. This increase was primarily due to an increase in the WTI benchmark oil price.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
On February 13, 2025, the Trust announced that Hilcorp had provided the Trust with its 2025 capital project plan for the Subject Interests (the “2025 Plan”), and Hilcorp has estimated its 2025 capital expenditures for the Subject Interests to be approximately $9.0 million.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
PNC Bank, National Association (“PNC Bank”), served as the previous Trustee of the Trust from October 8, 2021, through February 14, 2024. Effective February 15, 2024, Argent Trust Company, a Tennessee chartered trust company (“Argent”), became the Trustee of the Trust. The principal office of the Trust is 3838 Oak Lawn Avenue, Suite 1720, Dallas, Texas 75219 (telephone number
Previous report — wording carried elsewhere
Production of natural gas and oil and related average sales prices attributable to each of the Subject Interests and the Royalty for the nine months ended September 30, 2024 and 2023 were as follows: