San Juan Basin Royalty Trust skips October distribution due to cost deficit

Argent Trust Company, the trustee for the San Juan Basin Royalty Trust (NYSE: SJT), reported on October 20, 2026, that it will not declare a monthly cash distribution to unit holders. The decision stems from excess production costs incurred during prior periods and continued low natural gas pricing. These costs arise when production expenses and capital expenditures exceed gross proceeds for a specific period.

The cumulative balance of excess production costs stands at approximately $12,423,018 gross, or $9,317,264 net to the Trust. This deficit decreased by $130,448 gross, or $97,836 net, compared to the previous reporting period. Hilcorp San Juan L.P. will continue to charge this balance against the Trust's net proceeds each month. Until the balance is fully repaid, the Trust will not receive royalty income, as all net proceeds are applied to the deficit.

Distributions will resume only when future net proceeds are sufficient to repay the excess production costs accrued from Hilcorp's drilling of two new horizontal wells in 2024, replenish a $2,000,000 reserve, and repay the principal and interest on the Trust's line of credit with Texas Bank. Hilcorp reported total revenue of $4,868,781 from the subject interests for the August 2026 production month. This total comprised $4,688,244 in gas revenues and $180,537 in oil revenues. For the same period, Hilcorp reported production costs of $4,738,333, excluding the excess production cost balance. These costs included $2,899,702 in lease operating expenses, $317,045 in severance taxes, and $1,521,586 in capital costs.

Gas volumes for the subject interests in August 2026 totaled 2,057,618 Mcf (2,286,242 MMBtu), up from 2,046,556 Mcf (2,273,951 MMBtu) in July 2026. The average gas price for August 2026 was $2.28 per Mcf ($2.05 per MMBtu), an increase of $0.27 per Mcf ($0.24 per MMBtu) from July's average of $2.01 per Mcf ($1.81 per MMBtu). Trust administrative expenses for the month totaled $80,118. A draw of $80,101 from the line of credit and $17 in interest income will cover these October administrative expenses, bringing the outstanding principal balance on the line of credit to $1,155,501.

Cash reserves utilized to pay interest on the line of credit from July 2025 through May 2026 remain unchanged at $3,891. Production from the subject interests continues to be gathered and sold under market-sensitive agreements. The trustee is engaging with Hilcorp regarding accounting and reporting matters. Third-party compliance auditors are currently auditing payments made by Hilcorp to the Trust, including sales revenues, production costs, capital expenditures, and adjustments. This auditing process includes a detailed analysis of Hilcorp's pricing and rates to evaluate compliance with operative trust agreements and potential remedies for suspected non-compliance.