SAN JUAN BASIN ROYALTY TRUST
For the period ended Jun 30, 2025. Filed Aug 13, 2025.
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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.
Jun 30, 2025 · Filed Aug 13, 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 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. OverviewCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-08-13.
0000950170-25-107938
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 74 previous paragraphs and 82 current paragraphs.
45 unchanged; 27 reworded; 9 added; 1 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 3 previous and 4 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 (9)
Current 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.
Current 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.
Current report
Revenue comprised of ($26,812) in one-time expense credits and ($8,435) of applicable interest related to the 2021 audit settlement.
Current report
Revenue related to compliance audit exceptions and associated interest.
Current report
Line of Credit. The Trust is permitted to borrow funds against the Royalty to cover the Trust’s operating expenses. 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 bears interest at a rate of prime plus 1% per annum (8.5% at June 30, 2025) and matures on May 21, 2027. The Trust is required to make interest-only payments on the Note until May 21, 2027, at which time, the Trust will be required to also make monthly payments toward the principal. The Line of Credit is secured by substantially all of the assets of the Trust, including (a) all mineral interests owned by the Trust, (b) the oil, gas, and other minerals attributable to those mineral interests, (c) the personal property related to those mineral interests, and (d) the proceeds of the sale of the property described in (a) through (c), above. The agreement securing repayment of the Line of Credit contains customary covenants and events of default.
Current report
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, (b) replenish a reserve in the amount of $2,000,000, and (c) repay the Note in full, after which time, the Trust will resume distributions to the holders of the Trust’s Units of beneficial interest. The Trust utilized $29,932 in May 2025 to cover fees associated with obtaining the Line of Credit and $132,851 in June 2025 to help cover Trust administrative costs. As of June 30, 2025, the outstanding balance on the Line of Credit was $162,783.
Current report
The Trust is permitted to borrow funds against the Royalty to cover the Trust’s operating expenses. On May 21, 2025, the Trust established the Line of Credit with Texas Bank, and intends to use the funds as needed 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, (b) replenish a reserve in the amount of $2,000,000, and (c) repay the Note in full, after which time, the Trust will resume distributions to the holders of the Trust’s Units of beneficial interest.
Current report
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 as of June 30, 2025 was $32,968. For the months ended May 31, 2025, and June 30, 2025, Trust administrative expenses were paid using funds in the amounts of $84,838 from cash reserves and $132,851 from the Line of Credit, respectively, net of interest earned on Trust cash accounts.
Current report
Oil production volumes decreased for the Subject Interests by 1,168 Bbls (13.2%) for the three months ended June 30, 2025, as compared to the same period in 2024. Oil production volumes decreased for the Royalty by 955 Bbls (17.1%) for the three months ended June 30, 2025, as compared to the same period in 2024. For the six months ended June 30, 2025, oil production volume increased by 10,182 Bbls (174.9%) for the Subject Interests and 4,678 Bbls (148.0%) for the Royalty as compared to the same period in 2024. 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.
Removed paragraphs (1)
Previous 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.
Reworded paragraphs (27)
Previous 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.
Current 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.
Previous 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.
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 June 30, 2025, Hilcorp has spent $5.76 million of the $9.0 million budgeted under the 2025 Plan.
Previous 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.
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 18 workover wells completed, two new wells completed, and one new well in progress during the three months ended June 30, 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 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.
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 were $2,509,627 and $16,556,987 for the three and six months ended June 30, 2025, respectively. This reflects an increase of $1,679,755 and $14,736,321 for the three and six months ended June 30, 2025, respectively, when compared to the same periods in 2024. These increases were primarily attributable to a substantially higher capital project spending related to Hilcorp's drilling of two new horizontal wells.
Previous wording
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 wording
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 and the first half of 2025, Excess Production Costs accrued due to significant lease operating expenses and capital expenditures associated with Hilcorp’s drilling of two new horizontal wells. The balance of Excess Production Costs was $14,767,940 ($11,075,955 net to the Trust) and $21,739,947 ($16,304,960 net to the Trust) as of June 30, 2025 and March 31, 2025, respectively. Hilcorp will not pay Royalty Income to the Trust, until the balance of Excess Production Costs is paid in full. Further, no cash distribution will be made by the Trust until (a) the balance of Excess Production Costs is paid in full, (b) the Trustee replenishes a cash reserve in the amount of $2,000,000, and (c)the Trust repays the Note in full.
Previous wording
Results of Operations – for the Three Months Ended March 31, 2025 and 2024
Current wording
Results of Operations – for the Three and Six Months Ended June 30, 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 months ended March 31, 2025, and 2024 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 and six months ended June 30, 2025, and 2024 was determined as shown in the following table:
Previous 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.
Current wording
Net proceeds of $6,972,006 for the three months ended June 30, 2025 ($6,480,068 for the six months ended June 30, 2025), 75% of which would otherwise be payable to the Trust as Royalty Income, were applied to the balance of Excess Production Costs. The balance of cumulative Excess Production Costs, as of June 30, 2025, was approximately $14,767,940 gross ($11,075,955 net to the Trust). 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.
Previous 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.
Current wording
There was no Royalty Income distributed to the Trust for the three and six months ended June 30, 2025. Royalty income of $1,854,915 and $6,945,974 was distributed for the three and six months ended June 30, 2024, respectively. The decrease in Royalty Income was due primarily to substantially higher capital project spending associated with Hilcorp's drilling of two new horizontal wells. The average natural gas price increased from $1.92 per Mcf for the three months ended June 30, 2024, to $2.42 per Mcf for the three months ended June 30, 2025. The average natural gas price increased from $2.56 per Mcf for the six months ended June 30, 2024 to $3.08 per Mcf for the six months ended June 30, 2025. Production of natural gas from the Subject Interests increased from 5,457,753 Mcf for the three months ended June 30, 2024, to 7,085,582 Mcf for the three months ended June 30, 2025. Production of natural gas from the Subject Interests also increased from 11,052,769 Mcf for the six months ended June 30, 2024 to 14,706,475 Mcf for the six months ended June 30, 2025.
Previous 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.
Current wording
Gross Proceeds from Subject Interests. Total Gross Proceeds increased approximately $8.1 million, or 72.3%, for the three months ended June 30, 2025, compared to the three months ended June 30, 2024. Total Gross Proceeds increased approximately $13.6 million or 46.2% for the six months ended June 30, 2025 compared to the same time period in 2024. The increases were primarily due to slightly higher natural gas prices and higher production volumes, mainly attributable to the two new horizontal wells installed in 2024.
Previous 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.
Current 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 $1,679,755 for the three months ended June 30, 2025, compared to the three months ended June 30, 2024, and increased $14,736,321 for the six months ended June 30, 2025, compared to the same time period in 2024. The increase in capital costs in the three-month period ended June 30, 2025 was primarily attributable to Hilcorp's 2025 Plan (as defined below). The increase in capital costs in the six-month period was primarily attributable to Hilcorp's significantly higher capital project spending related to drilling two new horizontal wells in 2024.
Previous 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.
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 estimate in the 2025 Plan will be allocated to seven new vertical drill projects, all to be completed in the Dakota/Mesa Verde formations. Approximately $4.5 million of the $9.0 million estimate 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 estimate 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 June 30, 2025, Hilcorp has spent $1.25 million of the $5.76 million estimated under the 2025 Plan.
Previous 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.
Current wording
Severance Taxes. Aggregate severance taxes increased approximately $0.2 million, or 16%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and increased approximately $0.01 million or 0.3% for the six months ended June 30, 2025 compared to the same time period during 2024. The increase was primarily attributable to higher Gross Proceeds. Severance taxes represented approximately 8% of Gross Proceeds for the three months ended June 30, 2025 compared to approximately 12% for the same period of 2024. Severance taxes represented approximately 9% of Gross Proceeds for the six months ended June 30, 2025 and approximately 13% for the same period of 2024.
Previous 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.
Current wording
Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes increased $0.6 million or 7.1%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, lease operating expenses and property taxes increased approximately $0.5 million or 3% compared to the six months ended June 30, 2024.
Previous 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).
Current wording
Excess Production Costs. For the three months ended June 30, 2025, net proceeds of $6,972,006, 75% of which amount would otherwise have been payable to the Trust as Royalty Income, were applied to the balance of Excess Production Costs accrued as a result of Hilcorp's drilling of two new horizontal wells. The balance of cumulative Excess Production Costs, as of June 30, 2025, was approximately $14,767,940 gross ($11,075,955 net to the Trust). 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.
Previous wording
Distributable Income. Distributable Income for the three months ended March 31, 2025, and 2024 was determined as shown in the following table:
Current wording
Distributable Income. Distributable Income for the three and six months ended June 30, 2025, and 2024 was determined as shown in the following table:
Previous 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.
Current wording
There was no Distributable Income for the three and six months ended June 30, 2025. This was a decrease from $1.1 million ($0.022864 per Unit) for the three months ended June 30, 2024 and $5.2 million ($0.110671 per Unit) for the six months ended June 30, 2024. The decrease in Distributable Income was primarily attributable to significantly increased capital expenditures. The net loss for the three and six months ended June 30, 2025, resulted from the Trust’s draw on the Line of Credit to cover administrative expenses.
Previous 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.
Current wording
Interest Income. Interest income decreased for the three and six months ended June 30, 2025, as compared to the same periods in 2024 primarily due to the decrease in Royalty Income.
Previous 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.
Current wording
General&Administrative Expenses. General and administrative expenses decreased by $367,369 (48.4%) for the three months ended June 30, 2025 compared to the three months ended June 30, 2024. For the six months ended June 30, 2025, general and administrative expenses decreased by $472,904 (34.4%) compared to the six months ended June 30, 2024 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 $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.
Current wording
Cash Reserves. Total cash reserves were $32,968 as of June 30, 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 $1,767,041, 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 May 2025, when the Trust did not receive any Royalty Income. For the months ended May 31, 2025, and June 30, 2025, Trust administrative expenses were paid using funds in the amounts of $84,838 from the cash reserves and $132,851 from the Line of Credit, respectively, net of interest earned on Trust cash accounts. 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 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 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.
Previous wording
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 wording
In each of the months from May 2024 through June 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 June 2025, the Trust was able to use cash reserves to pay the Trust’s liabilities from May 2024 through May 2025. As of June 30, 2025, the balance of cash reserves was $32,968.
Previous wording
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 wording
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.
Previous 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.
Current wording
Royalty Income, if any, for the three months ended June 30, 2025, is associated with natural gas and oil production during the period from February 2025 through April 2025. Royalty Income, if any, for the six months ended June 30, 2025, is associated with natural gas and oil production from the Subject Interests during the period from November 2024 through April 2025.
Previous 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.
Current wording
Natural gas production volumes increased for the Subject Interests and the Royalty by 1,627,829 Mcf (29.8%) and 2,171,136 Mcf (494%), respectively for the three months ended June 30, 2025, as compared to the same period in 2024. For the six months ended June 30, 2025, natural gas production volumes increased 3,653,706 Mcf (33.1%) for the Subject Interests and decreased 1,182,701 Mcf (91.9%) for the Royalty compared to the same periods in 2024. Royalty volume is calculated using a formula determined by revenue less expenses. Excess Production Costs contributed to the decrease in natural gas production volumes and negative volumes 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.
Previous 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.
Current wording
The average realized natural gas price per Mcf increased for the three and six months ended June 30, 2025, as compared to the same periods in 2024. This increase 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 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.
Current wording
The average realized oil price per Bbl decreased for the three and six months ended June 30, 2025 as compared to the same periods in 2024. This decrease was primarily due to a decrease in the WTI benchmark oil price.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Production of natural gas and oil and related average sales prices attributable to each of the Subject Interests and the Royalty for the six months ended June 30, 2025 and 2024 were as follows:
Rearranged previous paragraphs (1)
Previous report — wording carried 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.