San Juan Basin Royalty Trust Declares No Cash Distribution for October 2024 and Announces Production Costs in Excess of Proceeds

DALLAS, Oct. 21, 2024 /PRNewswire/ --  Argent Trust Company, as the trustee (the "Trustee") of the San Juan Basin Royalty Trust (the "Trust") (NYSE:  SJT),  today  reported  that  it  will  not  declare  a  monthly  cash  distribution  to  the  holders  of  its  Units of beneficial interest (the "Unit Holders") due to excess production costs for the Trust's subject interests ("Subject Interests")  during  the  production  month  of  August 2024,  as  well  as  continued low  natural  gas  pricing.  Excess  production costs occur when production costs and capital expenditures exceed the gross proceeds for a certain period. Excess production costs for this reporting period are due primarily to significant lease operating expenses and capital expenditures associated with Hilcorp San Juan L.P.'s ("Hilcorp") 2024 capital project plan.

Hilcorp reported $3,594,338 of total revenue from the Subject Interests for the production month of August 2024, consisting of $3,442,328 of gas revenues and $152,010 of oil revenues. For the Subject Interests, Hilcorp  reported  $7,227,419  of  production  costs  (excluding  excess production  costs)  for  the  production  month  of  August 2024,  consisting of $2,408,163 of lease operating expenses, $463,668 of severance taxes, and $4,355,588 of capital costs.

Hilcorp will charge the excess production costs of approximately $15,150,449 gross ($11,362,837 net to the Trust) to the next month's distribution. No cash distributions will be made by the Trust until future net proceeds are sufficient to pay Trust liabilities and replenish cash reserves. This month's Trust administrative expenses totaled $87,522. The decrease in administrative expenses was attributable to differences in timing of the receipt and payment of certain expenses by the Trust. Interest income received by the Trust in the amount of $4,959 will be applied to cover a portion of this month's Trust administrative expenses, with cash reserves utilized to pay the remaining administrative expenses.

Based  upon  information  provided to the Trust by  Hilcorp, gas  volumes for  the subject interests  for  August  2024 totaled 1,922,538 Mcf (2,136,153 MMBtu), as compared to 1,891,889 Mcf (2,102,099 MMBtu) for July 2024. Dividing gas revenues by production volume yielded an average gas price for August 2024 of $1.79 per Mcf ($1.61 per MMBtu), as compared to an average gas price for June 2024 of $1.94 per Mcf ($1.75 per MMBtu).

Pursuant to the Amended and Restated Royalty Trust Indenture, dated December 12, 2007 (as amended on February 15, 2024, by the First Amendment to the Amended and Restated Royalty Trust Indenture), the Trustee is authorized to retain, in its sole discretion, a cash reserve for payment of Trust liabilities that are contingent or uncertain or otherwise not currently due and payable. To cover Trust expenses during any period of revenue shortfall, which has resulted and may continue to result from lower commodity prices and increased capital expenditures and lease operating expenses under  Hilcorp's 2024 capital project plan for the Subject Interests, the Trustee increased the cash reserves in March and April of 2024, such that total cash reserves were $1.8 million as of April 30, 2024. Interest income and cash reserves were utilized to pay Trust administrative expenses each month from May through September of 2024. This month, cash reserves in the amount of $82,564 will be utilized to cover the balance of Trust administrative expenses which will bring the balance of cash reserves maintained by the Trustee to $1,017,135. Prior to any future distributions to Unit Holders, the Trustee plans to replenish the cash reserves and continue to increase the cash reserves to $2.0 million.

Production from the Subject Interests continues to be gathered, processed, and sold under market sensitive and customary  agreements,  as  recommended  for  approval  by  the  Trust's Consultant.  The  Trustee continues  to  engage with Hilcorp regarding its ongoing accounting and reporting to the Trust, and the Trust's third-party compliance auditors continue to audit payments made by Hilcorp to the Trust, inclusive of sales revenues, production costs, capital expenditures, adjustments, actualizations, and recoupments.  The Trust's auditing process has also included detailed analysis of Hilcorp's pricing and rates charged. As previously disclosed in the Trust's filings, these revenues and costs (along with all costs) are the subject of the Trust's ongoing comprehensive audit process by the Trust's professional  consultants  and  outside counsel  to  analyze compliance  with  all  the  underlying  operative  Trust  agreements  and  evaluate potential remedies in the event there is suspected non-compliance.

Forward  Looking  Statements.  Except  for  historical  information contained in  this  news release,  the  statements  in this  news release are forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform  Act  of  1995.  Such  forward-looking  statements generally  are  accompanied  by words  such as  "estimates," "anticipates,"  "could," "plan,"  or  other  words  that  convey  the  uncertainty  of  future  events or  outcomes.  Forward-looking statements  and  the  business prospects  of  San  Juan  Basin  Royalty  Trust  are  subject to  a  number  of  risks  and  uncertainties that  may  cause  actual results  in  future periods  to  differ materially  from  the  forward-looking  statements.  These  risks  and uncertainties include, among other things, certain information provided to the Trust  by Hilcorp, volatility of oil and gas prices,  governmental  regulation  or  action, litigation,  and  uncertainties  about  estimates  of  reserves.  These  and  other risks are described in the Trust's  reports and other filings with the Securities and Exchange Commission.