SAN JUAN BASIN ROYALTY TRUST
For the period ended Mar 31, 2026. Filed May 14, 2026.
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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.
Mar 31, 2026 · Filed May 14, 2026
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 2025-09-30; filed 2025-11-13.
0001193125-25-279441
Item 2. Trustee’s Discu ssion and Analysis of Financial Condition and Results of Operations. OverviewCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-14.
0001193125-26-223189
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 82 previous paragraphs and 80 current paragraphs.
46 unchanged; 27 reworded; 4 added; 8 removed; 1 previous and 3 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 (4)
Current report
Other revenue consists of a ($3,472,228) gross (($2,604,171) net to the Trust) prior period adjustment from the 2017 through 2020 joint venture audit. The Trust’s joint interest auditors are reviewing that negative prior period adjustment.
Current report
$758,570 for the three months ended March 31, 2026. The decrease in capital costs for the period was primarily attributable to a lower capital project spending budget for Hilcorp's 2025 plan.
Current report
Distributable Income decreased $0.36 million to ($362,706) for the three months ended March 31, 2026. The decrease in Distributable Income was primarily attributable to Hilcorp’s application of a negative prior period adjustment of ($3,472,228) gross (($2,604,171) net to the Trust) for the period from 2017 through 2020, as well as a sharp decline in natural gas prices, and the continued application of Net Proceeds to the cumulative balance of Excess Production Costs.
Current report
Oil production volumes increased for the Subject Interests and Royalty by 1,358 Bbls (16.3%) and 2,199 Bbls (68.7%), respectively for the three months ended March 31, 2026, as compared to the same period in 2025. These changes generally resulted from changes in demand and market conditions.
Removed paragraphs (8)
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 ($26,812) in one-time expense credits and ($8,435) of applicable interest related to the 2021 audit settlement.
Previous report
Revenue related to compliance audit exceptions and associated interest.
Previous report
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have and will continue to impact Net Proceeds. Hilcorp's capital expenditures decreased $6,947,777 for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and increased $7,788,545 for the nine months ended September 30, 2025, compared to the same time period in 2024. The decrease in capital costs in the three-month period ended September 30, 2025 was primarily attributable to the reduced expenditures under Hilcorp's 2025 Plan (as defined below). The increase in capital costs in the nine-month period was primarily attributable to Hilcorp's significantly higher capital project spending related to drilling two new horizontal wells in 2024, the costs of which extended into the early part of 2025.
Previous 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.
Previous 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. Funds in the amounts of $18,565, $19,318, and $73,469 from the Line of Credit were utilized in July, August, and September, respectively to pay Trust administrative expenses, net of interest earned on Trust cash accounts. As of September 30, 2025, the outstanding balance on the Line of Credit was $274,135.
Previous report
There was no Distributable Income for the three and nine months ended September 30, 2025. There was no distributable income for the three months ended September 30, 2024 and $6.9 million ($0.110670 per Unit) for the nine months ended September 30, 2024. The decrease in Distributable Income was primarily attributable Hilcorp’s significantly increased capital expenditures in drilling two new horizontal wells in 2024, the costs of which extended into the early part of 2025. The net loss for the three and nine months ended September 30, 2025, resulted from the Trust’s draw on the Line of Credit to cover administrative expenses.
Previous report
Oil production volumes decreased for the Subject Interests by 3,336 Bbls (30.0%) for the three months ended September 30, 2025, as compared to the same period in 2024. Oil production volumes decreased for the Royalty by 2,509 Bbls (38.8%) for the three months ended September 30, 2025, as compared to the same period in 2024. For the nine months ended September 30, 2025, oil production volume decreased by 1,797 Bbls (7.0%) for the Subject Interests and 3,423 Bbls (22.5%) 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, oil and natural gas inventory levels, availability of market conditions, and an increase in capital spending to generate production from new and existing wells.
Reworded paragraphs (27)
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
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 wording
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. In February 2026, Hilcorp applied a negative prior period adjustment of ($3,472,228) gross (($2,604,171) net to the Trust) for the period from 2017 through 2020. The Trust’s joint interest auditors are reviewing the negative prior period adjustment, as previously certain underpayments were identified for this same period from 2017 through 2020 which culminated in a payment to the Trust in 2023 of $1,037,093.45.
Previous wording
The amount of Gross Proceeds also depends on the volumes of natural gas and oil produced from the Subject Interests. Under the terms of the Indenture, the Trust cannot acquire new natural gas and oil assets, and as a result, Royalty Income is dependent on the natural gas and oil volumes attributable to the Subject Interests. Although Hilcorp and other operators of the Subject Interests may conduct drilling operations or well recompletions in the near term, the Subject Interests are depleting assets; Hilcorp has informed the Trust that it is unable to estimate the productive life of the Subject Interests. The reduction in proved reserve quantities is a common measure of depletion. Hilcorp’s (or a future operator’s) capital investments in the Subject Interests will affect the quantity of proved reserves and can offset any reduction in proved reserves. Lower commodity prices may also reduce the volume of natural gas and oil produced from the Subject Interests by Hilcorp.
Current wording
The amount of Gross Proceeds also depends on the volumes of natural gas and oil produced from the Subject Interests. Under the terms of the Indenture, the Trust cannot acquire new natural gas and oil assets, and as a result, Royalty Income is dependent on the natural gas and oil volumes attributable to the Subject Interests. Although Hilcorp and other operators of the Subject Interests may conduct drilling operations or well recompletions in the near term, the Subject Interests are depleting assets; Hilcorp has informed the
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 September 30, 2025, Hilcorp advised the Trust that it has spent $7.70 million of the $9.0 million budgeted under the 2025 Plan.
Current wording
On February 19, 2026, the Trust announced that Hilcorp had provided the Trust with its 2026 capital project plan for the Subject Interests (the “2026 Plan”), and Hilcorp has estimated its 2026 capital expenditures for the Subject Interests to be approximately $14.0 million.
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 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 September 30, 2025, Hilcorp advised the Trust that it has spent $7.70 million of the $9.0 million budgeted under the 2025 Plan.
Current wording
Hilcorp informed the Trust that its 2026 Plan for the Subject Interests includes 32 projects. Approximately $11.5 million of the $14.0 million budget in the 2026 Plan will be allocated to nine new vertical drill projects to be completed in the Mesaverde, Mancos, and Dakota formations and six new horizontal drill projects in the Mancos formation. Hilcorp also informed the Trust that costs associated with the six new horizontal drill projects include drilling costs only. Completion costs for the horizontal wells are expected to be included in Hilcorp’s 2027 capital plan for the Subject Interests, which is expected to be provided to the Trust sometime in the first quarter of 2027. Approximately $2.0 million of the $14.0 million budget of the 2026 Plan will be allocated to 17 projects for recompletions and workovers in the Fruitland Coal and Pictured Cliffs formations, and approximately $0.5 million of the $14.0 million budget will be allocated to facilities projects related to natural gas compression and other facilities projects. Hilcorp further informed the Trust that its 2026 Plan is subject to revision if Hilcorp revises its assumptions underlying the 2026 Plan, and that actual capital costs may vary from these estimates. As of March 31, 2026, Hilcorp has spent $0.76 million of the $9.0 million budgeted under the 2026 Plan.
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 were $3,941,821 and $50,509,986 for the three and nine months ended September 30, 2025, respectively. This reflects a decrease of $6,947,777 for the three months ended September 30, 2025 and an increase of $7,788,545 for the nine months ended September 30, 2025, respectively, when compared to the same periods in 2024. These differentials were primarily attributable to a substantially higher capital project spending related to Hilcorp's drilling of two new horizontal wells in 2024, costs of which extended into the early part of 2025.
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 decreased approximately $13,288,790, from $14,047,360 for the three months ended March 31, 2025 to $758,570 for the three months ended March 31, 2026. The decrease in capital costs for the period was primarily attributable to a lower capital project spending budget for Hilcorp's 2025 plan.
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 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 $13,593,734 ($10,195,300 net to the Trust) as of September 30, 2025. 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.
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, 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. As of December 31, 2025, the balance of Excess Production Costs was $8,438,536 gross ($6,328,902 net to the Trust). As of March 31, 2025, the balance of Excess Production Costs was $6,186,819 ($4,640,115 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.
Previous wording
Results of Operations – for the Three and Nine Months Ended September 30, 2025 and 2024
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, 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 months ended March 31, 2026, and 2025 was determined as shown in the following table:
Previous wording
Net proceeds of $1,174,206 for the three months ended September 30, 2025 ($7,654,275 for the nine months ended September 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 September 30, 2025, was approximately $13,593,734 gross ($10,195,300 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.
Current wording
For the three months ended March 31, 2026, net proceeds of $2,251,717, which amount would otherwise have been payable to the Trust as royalty income, were applied to the balance of the Excess Production Costs. 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 $6,186,819 ($4,640,115 net to the Trust).
Previous wording
There was no Royalty Income distributed to the Trust for the three and nine months ended September 30, 2025. There was no Royalty income distributed for the three months ended September 30, 2024 and $6,945,974 of Royalty Income was distributed for the nine months ended September 30, 2024. The decrease in Royalty Income was due primarily to substantially higher capital project spending associated with Hilcorp's drilling of two new horizontal wells in 2024, the costs of which extended into the early part of 2025. The average natural gas price increased from $1.49 per Mcf for the three months ended September 30, 2024, to $2.11 per Mcf for the three months ended September 30, 2025. The average natural gas price increased from $2.20 per Mcf for the nine months ended September 30, 2024 to $2.63 per Mcf for the nine months ended September 30, 2025. Production of natural gas from the Subject Interests increased from 5,691,025 Mcf for the three months ended September 30, 2024, to 6,918,497 Mcf for the three months ended September 30, 2025. Production of natural gas from the Subject Interests also increased from 16,743,796 Mcf for the nine months ended September 30, 2024 to 21,624,972 Mcf for the nine months ended September 30, 2025.
Current wording
There was no Royalty Income distributed to the Trust for the three months ended March 31, 2026 and 2025, due primarily to substantially higher capital project spending associated with Hilcorp's drilling of two new horizontal wells in 2024. Additionally, Royalty Income was affected by continued low natural gas prices and an increase in lease operating expenses. The average natural gas price decreased from $2.99 per Mcf for the three months ended March 31, 2025, to $2.85 per Mcf for the three months ended March 31, 2026. Production of natural gas from the Subject Interests decreased from 7,620,893 Mcf for the three months ended March 31, 2025, to 6,351,787 Mcf for the three months ended March 31, 2026.
Previous wording
Gross Proceeds from Subject Interests. Total Gross Proceeds increased approximately $5.8 million, or 62.1%, for the three months ended September 30, 2025, compared to the three months ended September 30, 2024. Total Gross Proceeds increased approximately $19.4 million or 50.0% for the nine months ended September 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.
Current wording
Gross Proceeds from Subject Interests. Total Gross Proceeds decreased approximately $8.6 million, or 36.3%, for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decreases were primarily due to a leveling of production volumes from the two new horizontal wells Hilcorp drilled in 2024 and a prior period adjustment of $3.5 million.
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 12 workover wells completed, three new wells completed, and one new well in progress during the three months ended September 30, 2025.
Current wording
Hilcorp informed the Trust that its 2026 Plan for the Subject Interests includes 32 projects. Approximately $11.5 million of the $14.0 million budget in the 2026 Plan will be allocated to nine new vertical drill projects to be completed in the Mesaverde, Mancos, and Dakota formations and six new horizontal drill projects in the Mancos formation. Hilcorp also informed the Trust that costs associated with the six new horizontal drill projects include drilling costs only. Completion costs for the horizontal wells are expected to be included in Hilcorp’s 2027 capital plan for the Subject Interests, which is expected to be provided to the Trust sometime in the first quarter of 2027. Approximately $2.0 million of the $14.0 million budget of the 2026 Plan will be allocated to 17 projects for recompletions and workovers in the Fruitland Coal and Pictured Cliffs formations, and approximately $0.5 million of the $14.0 million budget will be allocated to facilities projects related to natural gas compression and other facilities projects. Hilcorp further informed the Trust that its 2026 Plan is subject to revision if Hilcorp revises its assumptions underlying the 2026 Plan, and that actual capital costs may vary from these estimates. As of March 31, 2026, Hilcorp has spent $0.76 million of the $9.0 million budgeted under the 2026 Plan.
Previous wording
Severance Taxes. Aggregate severance taxes increased approximately $0.5 million, or 48%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 and increased approximately $0.56 million or 11.3% for the nine months ended September 30, 2025 compared to the same time period during 2024. The increase was primarily attributable to higher Gross Proceeds. Severance taxes represented approximately 11.2% of Gross Proceeds for the three months ended September 30, 2025 compared to approximately 12.2% for the same period of 2024. Severance taxes represented approximately 9.5% of Gross Proceeds for the nine months ended September 30, 2025 and approximately 12.8% for the same period of 2024.
Current wording
Severance Taxes. Aggregate severance taxes decreased approximately $0.3 million, or 15%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was primarily attributable to the decrease in the price of gas. Severance taxes represented approximately 12% of Gross Proceeds for the three months ended March 31, 2026 compared to approximately 9% for the same period of 2025.
Previous wording
Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes increased $0.69 million or 9.1%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, lease operating expenses and property taxes increased approximately $1.17 million or 5% compared to the nine months ended September 30, 2024.
Current wording
Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes increased $2.26 million or 28.4%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Previous wording
Excess Production Costs. For the three months ended September 30, 2025, net proceeds of $1,174,206, 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 in 2024. The balance of cumulative Excess Production Costs, as of September 30, 2025, was approximately $13,593,734 ($10,195,300 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.
Current wording
Excess Production Costs. For the three months ended March 31, 2026, net proceeds of $2,251,717, which amount would otherwise have been payable to the Trust as royalty income, were applied to the balance of the Excess Production Costs. 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. As such, the cumulative balance of Excess Production Costs as of March 31, 2026, is to be recovered in future periods when the Gross Proceeds exceed Production Costs for such period. The balance of Excess Production Costs as of March 31, 2025 was $6,186,819 ($4,640,115 net to the Trust).
Previous wording
Distributable Income. Distributable Income for the three and nine months ended September 30, 2025, and 2024 was determined as shown in the following table:
Current wording
Distributable Income. Distributable Income for the three months ended March 31, 2026, and 2025 was determined as shown in the following table:
Previous wording
Interest Income. Interest income decreased for the three and nine months ended September 30, 2025, as compared to the same periods in 2024 primarily due to the decrease in Royalty Income and cash reserves.
Current wording
Interest Income. Interest income decreased for the three months ended March 31, 2026, as compared to the same periods in 2025 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 by $270,968 (70.1%) for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, general and administrative expenses decreased by $1,143,872 (52.9%) compared to the nine months ended September 30, 2024 due to differences in timing of the receipt and payment of certain expenses by the Trust, expenses in the first half of 2024 associated with the transition to Argent Bank as Trustee of the Trust, and a decrease in publishing and printing costs.
Current wording
General&Administrative Expenses. General and administrative expenses decreased by $138,812 (27%) for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was primarily attributable to decreasing Trust expenses such as printing and publishing, and differences in timing of the receipt and payment of certain expenses by the Trust.
Previous wording
Cash Reserves. Total cash reserves were $29,160 as of September 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. Cash reserves were utilized to pay interest accrued on the Line of Credit for the months of July, August, and September 2025, in the amounts of $1,059, $1,292, and $1,450 respectively. 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 $14,380 as of March 31, 2026. 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 had cash reserves of $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. From June 2025 through March 2026, cash reserves were used to pay interest on the Line of Credit. Prior to any distributions to Unit Holders, the Trustee plans to replenish the cash reserves and continue to increase the cash reserves to at least $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
In each of the months from May 2024 through September 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 September 30, 2025, the balance of cash reserves was $28,946.
Current wording
In each of the months from May 2024 through December 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 March 31, 2026, the balance of cash reserves held by the Trust to cover Trust liabilities was $14,380.
Previous wording
Funds from the Line of Credit were utilized to pay Trust administrative expenses, net of interest earned on Trust cash accounts, from June through September 2025. As of September 30, 2025, the outstanding balance on the Line of Credit was $274,135. Cash reserves were utilized to pay interest accrued on the Line of Credit for the months of July, August, and September 2025, in the amounts of $1,059, $1,292, and $1,450 respectively, such that the balance of cash reserves maintained by the Trust is currently $28,946.
Current wording
Funds from the Line of Credit were utilized to pay Trust administrative expenses, net of interest earned on Trust cash accounts, from June 2025 through March 2026. As of March 31, 2026, the outstanding balance on the Line of Credit was $750,514. Cash reserves were utilized to pay interest accrued on the Line of Credit for the months of July 2025 through March 2026, such that the balance of cash reserves maintained by the Trust is currently $14,380.
Previous wording
Royalty Income, if any, for the three months ended September 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 nine months ended September 30, 2025, is associated with natural gas and oil production from the Subject Interests during the period from November 2024 through April 2025.
Current wording
Royalty Income for the three months ended March 31, 2026, is associated with natural gas and oil production during the period from November 2025 through January 2026. Royalty Income for the three months ended March 31, 2025, is associated with natural gas and oil production from the Subject Interests during the period from November 2024 through January 2025.
Previous wording
Natural gas production volumes increased for the Subject Interests and the Royalty by 1,227,472 Mcf (21.6%) and 4,881,176 Mcf (29.2%), respectively for the three months ended September 30, 2025, as compared to the same period in 2024. For the nine months ended September 30, 2025, natural gas production volumes increased 6,776,707 Mcf (101.4%) for the Subject Interests and 5,594,006 Mcf (103.7%) 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 lower natural gas production volumes and negative volumes for the Royalty in 2024. The increase in production volume in 2025 was affected by production from the two horizontal wells installed in 2024. Natural gas pricing is affected by market conditions and 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 decreased for the Subject Interests by 1,269,106 Mcf (17%) and increased for the Royalty by 3,141,219 (193%), respectively for the three months ended March 31, 2026, as compared to the same period in 2025. Royalty volume is calculated using a formula determined by revenue less expenses. Excess production costs contributed to negative volumes for gas for the Royalty in 2025. The decrease in production volume for the Subject Interests is attributed to the leveling of production from 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 increased for the three and nine months ended September 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.
Current wording
The average realized natural gas price per Mcf decreased for the three months ended March 31, 2026, as compared to the same periods in 2025. 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 decreased for the three and nine months ended September 30, 2025 as compared to the same periods in 2024. This decrease was primarily due to a decrease in the WTI benchmark oil price.
Current wording
The average realized oil price per Bbl decreased for the three months ended March 31, 2026 as compared to the same periods in 2025. This increase was primarily due to an decrease in the WTI benchmark oil price.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
Trust that it is unable to estimate the productive life of the Subject Interests. The reduction in proved reserve quantities is a common measure of depletion. Hilcorp’s (or a future operator’s) capital investments in the Subject Interests will affect the quantity of proved reserves and can offset any reduction in proved reserves. Lower commodity prices may also reduce the volume of natural gas and oil produced from the Subject Interests by Hilcorp.
Current report — wording carried from elsewhere
Capital Expenditures. The timing and size of capital expenditures by Hilcorp have impacted and continue to impact Net Proceeds. Hilcorp’s capital expenditures decreased approximately $13,288,790, from $14,047,360 for the three months ended March 31, 2025 to
Current report — wording carried from elsewhere
On February 19, 2026, the Trust announced that Hilcorp had provided the Trust with its 2026 capital project plan for the Subject Interests (the “2026 Plan”), and Hilcorp has estimated its 2026 capital expenditures for the Subject Interests to be approximately $14.0 million.
Rearranged previous paragraphs (1)
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, 2025 and 2024 were as follows: