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Overview
San Juan Basin Royalty Trust (SJT) is an energy sector express trust based in Houston, Texas, which holds a significant net overriding royalty interest derived predominantly from natural gas and, to a lesser degree, oil production in the San Juan Basin of northwestern New Mexico. With its interests carved out of Southland's oil and natural gas portfolio, the trust has established a focused presence in a vital energy-producing region.
Business Model and Revenue Generation
The trust operates by acquiring a 75% net overriding royalty interest, which entitles it to a substantial portion of production revenues without being directly involved in the operational aspects of field production. Revenues are generated predominantly through the collection of royalties linked to natural gas sales, complemented by oil revenues. The structure of the trust enables it to benefit from the production activities carried out on approximately 119,000 net producing acres across several counties. The revenue is subject to the conditions of market-sensitive pricing and varying production costs, with emerging trends in production expenses being closely monitored.
Operational Framework and Risk Management
SJT’s operational framework is underpinned by robust contractual agreements with third-party operators, ensuring that production, sales, and auditing processes adhere to industry best practices. The trust relies on specialized trustees and independent auditors to engage in detailed analysis of production costs, capital expenditures, and compliance with contractual agreements. Crucially, the trustee retains the discretion to manage cash reserves, ensuring that trust liabilities and administrative expenses are met even during periods of commodity price volatility or elevated production costs. This strategic management of resources underlines the trust’s commitment to operational discipline and risk mitigation.
Geographic and Market Positioning
San Juan Basin Royalty Trust operates predominantly in the San Juan Basin, a region recognized for its rich natural gas and oil resources. The trust’s assets span key counties in northwestern New Mexico, positioning it competitively within a vital energy-producing landscape. Such geographic specificity not only allows for a concentrated focus on resource production but also facilitates tighter integration with market dynamics related to natural gas pricing and production expenditures.
Industry Relevance and Competitive Landscape
Within the energy sector, royalty trusts like SJT play a unique role by separating the asset ownership from the operational management of production activities. This structure provides investors with exposure to commodity price movements without the operational risks associated with drilling and production management. The trust’s reliance on natural gas as its primary revenue driver, supported by a minority share in oil revenues, underscores its specialization in a market segment that is subject to dynamic pricing and regulatory considerations. In an environment where production costs and capital expenditures are closely scrutinized, SJT’s proactive management of cash reserves and detailed auditing processes provide a measure of stability and transparency, contributing to its respected position within the competitive landscape of energy royalty trusts.
Key Operational Aspects
- Royalty Structure: SJT benefits from a 75% net overriding royalty interest in oil and natural gas production.
- Geographic Focus: The trust’s subject interests are concentrated across key counties in the San Juan Basin of northwestern New Mexico.
- Revenue Streams: Predominantly derived from natural gas production, with supplemental oil production revenues.
- Risk Mitigation: Strategic cash reserves and a comprehensive auditing process help manage production cost variability and market fluctuations.
- Management Framework: Administered by professional trustees and supported by third-party compliance auditors to ensure adherence to contractual agreements.
The comprehensive nature of SJT’s structure, coupled with its adherence to stringent operational protocols, underscores its established role in aggregating production revenues while managing the challenges posed by market volatility and production cost pressures. This careful balancing act resonates strongly with investors seeking transparent and specialized exposure within the energy sector.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution to Unit Holders for March 2025 due to excess production costs from Hilcorp's drilling of two horizontal wells in 2024. The current balance of excess production costs is approximately $21.7M gross ($16.3M net to Trust).
For January 2025, Hilcorp reported total revenue of $10.15M from Subject Interests, with gas revenues of $10.06M and oil revenues of $88,082. Production costs were $4.61M, including $2.57M in lease operating expenses, $784,303 in severance taxes, and $1.26M in capital costs. Gas production totaled 2.69M Mcf at an average price of $3.74 per Mcf, up from $3.14 in December.
The Trust's cash reserves decreased to $258,521, with $253,619 used for administrative expenses. Hilcorp's 2025 capital project plan estimates $9.0M in expenditures, including $4.0M for seven new vertical drill projects, $4.5M for recompletions and workovers, and $0.5M for facilities projects.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for February 2025 due to excess production costs and low natural gas prices. The Trust reported total revenue of $8.69 million for December 2024, with production costs of $6.46 million. Cumulative excess production costs stand at $27.28 million gross ($20.46 million net to Trust).
Gas volumes for December 2024 totaled 2,669,858 Mcf at an average price of $3.14 per Mcf, compared to 2,261,819 Mcf at $2.10 per Mcf in November. The Trust's cash reserves decreased to $512,140, with plans to increase reserves to $2.0 million before future distributions.
Hilcorp's 2025 capital project plan estimates approximately $9.0 million in expenditures, including $4.0 million for new vertical drill projects, $4.5 million for recompletions and workovers, and $0.5 million for facilities projects.
San Juan Basin Royalty Trust (NYSE: SJT) announced Hilcorp Energy Company's 2025 capital project plan, estimating expenditures of $9.0 million for 29 projects. The budget allocation includes:
- $4.0 million for seven new vertical drill projects in Dakota/Mesaverde formations
- $4.5 million for 22 recompletions and workovers in Fruitland Coal formation
- $0.5 million for facilities projects related to natural gas compression
For comparison, in 2024, Hilcorp's capital expenditures through November totaled $33.6 million out of a projected $34.0 million, with $24.6 million spent on two horizontal drilling projects in the Mancos formation, $8.0 million on recompletions and workovers, and $1.0 million on facilities projects.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution to Unit Holders for January 2025 due to excess production costs and low natural gas prices. Hilcorp reported total revenue of $4,880,618 from Subject Interests for November 2024, including $4,752,207 in gas revenues and $128,411 in oil revenues. However, production costs were significantly higher at $13,139,376.
The excess production costs of approximately $29.5 million gross ($22.1 million net to Trust) will be charged to next month's distribution. Gas volumes totaled 2,261,819 Mcf at an average price of $2.10 per Mcf, compared to 1,880,071 Mcf at $1.92 per Mcf in October 2024.
The Trust's cash reserves decreased to $651,323 after covering administrative expenses. The Trustee plans to replenish and increase cash reserves to $2.0 million before future distributions resume.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for December 2024 due to excess production costs and low natural gas prices. Hilcorp reported total revenue of $3,674,540 from Subject Interests for October 2024, but faced production costs of $7,059,218. The excess production costs of approximately $21.2 million gross will be charged to next month's distribution.
Gas volumes totaled 1,880,071 Mcf with an average price of $1.92 per Mcf for October 2024, compared to September's $1.42 per Mcf. The Trust's cash reserves will decrease to $760,919 after covering administrative expenses. The Trustee plans to replenish and increase cash reserves to $2.0 million before future distributions to Unit Holders.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for November 2024 due to excess production costs and low natural gas prices. Hilcorp reported total revenue of $2,853,533 from Subject Interests for September 2024, while production costs were $5,566,414. The excess production costs of approximately $17.86 million gross will be charged to next month's distribution. Gas volumes totaled 1,869,291 Mcf with an average price of $1.42 per Mcf, down from $1.79 in August. The Trust's cash reserves will decrease to $961,566 after covering administrative expenses, with plans to increase reserves to $2.0 million before future distributions.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for October 2024 due to excess production costs and low natural gas pricing. Hilcorp reported $3,594,338 total revenue and $7,227,419 production costs for August 2024. Excess production costs of $15,150,449 gross will be charged to the next month's distribution. The Trust's administrative expenses were $87,522, partially covered by $4,959 interest income. Gas volumes totaled 1,922,538 Mcf with an average price of $1.79 per Mcf. The Trustee utilized $82,564 from cash reserves, leaving a balance of $1,017,135. The Trust plans to replenish and increase cash reserves to $2.0 million before future distributions.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for September 2024 due to excess production costs and low natural gas prices. Hilcorp San Juan L.P. reported $3,905,235 in total revenue and $6,966,097 in production costs for July 2024. The excess production costs of $11,517,368 gross will be charged to the next month's distribution. Gas volumes for July 2024 totaled 1,891,889 Mcf with an average price of $1.94 per Mcf.
The Trust's cash reserves were $1,099,699 after utilizing $139,442 to cover administrative expenses. The Trustee plans to replenish and increase cash reserves to $2.0 million before future distributions. The Trust continues to audit Hilcorp's payments and analyze compliance with operative agreements.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for August 2024 due to excess production costs and low natural gas pricing. Hilcorp reported $2,851,950 in total revenue and $6,419,934 in production costs for June 2024. The excess production costs of approximately $8,456,506 gross ($6,342,379 net to the Trust) will be charged to the next month's distribution. Trust administrative expenses totaled $187,698. Gas volumes for June 2024 were 1,828,685 Mcf with an average price of $1.41 per Mcf. The Trustee is utilizing cash reserves to cover expenses and plans to increase reserves to $2.0 million before future distributions.
San Juan Basin Royalty Trust (NYSE: SJT) announced no cash distribution for July 2024 due to excess production costs and lower natural gas pricing. Hilcorp reported $2,518,037 in total revenue and $6,183,810 in production costs for May 2024. The excess production costs of approximately $4,888,522 gross will be charged to the next month's distribution. Gas volumes for May 2024 totaled 1,970,451 Mcf, with an average gas price of $1.14 per Mcf. The Trust's cash reserves were $1,420,537 after covering administrative expenses. The Trustee plans to increase cash reserves to $2.0 million before future distributions.
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