San Juan Basin Royalty Trust Announces Hilcorp's 2025 Capital Plan

Rhea-AI Summary

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.

Positive

• Diversified project portfolio with 29 planned developments for 2025
• Consistent execution of capital plans (2024 spending at $33.6M vs $34.0M projected)

Negative

• 73.5% reduction in capital expenditure from 2024 ($34.0M) to 2025 ($9.0M)
• Shift from higher-value horizontal drilling to lower-cost vertical drilling projects

Insights

Energy Investment Analyst

The announced 73.5% reduction in capital expenditure from $34.0 million to $9.0 million for 2025 signals a significant strategic shift that warrants careful analysis. The transition from horizontal Mancos formation drilling to vertical wells in the Dakota/Mesaverde formations represents a more conservative approach to capital deployment.

The 2025 plan's focus on vertical wells, while less expensive per well, typically yields lower production rates compared to horizontal wells. However, vertical wells in proven formations often provide more predictable returns and lower operational risks. The $4.5 million allocation for recompletions and workovers in the Fruitland Coal formation suggests a strategy focused on maintaining existing production rather than aggressive growth.

This capital restructuring indicates Hilcorp's adaptation to current market conditions, possibly reflecting a response to natural gas price volatility and the need to optimize capital efficiency. The reduced capital program will likely result in lower near-term production growth but may provide more stable, albeit potentially lower, distributions to trust unitholders. The emphasis on workover projects demonstrates a focus on maximizing returns from existing wells rather than pursuing costlier new drilling initiatives.

The modest $0.5 million allocation to compression and facility projects suggests minimal infrastructure expansion, aligning with the more conservative capital approach. This maintenance-focused strategy could help preserve cash flow in an uncertain commodity price environment but may limit upside potential if natural gas prices strengthen significantly.

DALLAS, Feb. 13, 2025 /PRNewswire/ -- Argent Trust Company, as the trustee (the "Trustee") of the San Juan Basin Royalty Trust (the "Trust") (NYSE: SJT), announced today that the operator of the Trust's subject interests ("Subject Interests"), Hilcorp Energy Company ("Hilcorp") has provided the Trust with its calendar year 2025 capital project plan for the Subject Interests (the "2025 Plan"). Under the 2025 Plan, Hilcorp estimates its 2025 capital expenditures for the Subject Interests to be approximately $9.0 million.

Hilcorp informed the Trust that the 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/Mesaverde 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.

For calendar year 2024, Hilcorp projected capital expenditures of approximately $34.0 million. Hilcorp informed the Trust that Hilcorp's actual capital expenditures from January 2024 through November 2024 totaled approximately $33.6 million. Hilcorp reports that approximately $24.6 million was spent on two new horizontal drilling projects in the Mancos formation, approximately $8.0 million was spent on recompletions and workovers, and approximately $1.0 million was spent on facilities projects related to natural gas compression and other facility projects.

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.

Contact:	San Juan Basin Royalty Trust
	Argent Trust Company, Trustee
	Nancy Willis, Director of Royalty Trust Services
	Toll-free: (855) 588-7839 or (866) 809-4553
	Fax: (214) 559-7010
	Website: www.sjbrt.com
	Email: trustee@sjbrt.com

View original content:https://www.prnewswire.com/news-releases/san-juan-basin-royalty-trust-announces-hilcorps-2025-capital-plan-302376452.html

SOURCE San Juan Basin Royalty Trust

FAQ

What is Hilcorp's 2025 capital expenditure plan for SJT's Subject Interests?

Hilcorp plans to spend $9.0 million on 29 projects in 2025, including $4.0 million for vertical drilling, $4.5 million for recompletions and workovers, and $0.5 million for facilities projects.

How does SJT's 2025 capital budget compare to 2024?

The 2025 capital budget of $9.0 million is significantly lower than 2024's $34.0 million budget, representing a 73.5% reduction.

What are the main components of SJT's 2025 drilling program?

The 2025 program includes seven new vertical drill projects in Dakota/Mesaverde formations and 22 recompletions and workovers in the Fruitland Coal formation.

How much did Hilcorp spend on SJT's horizontal drilling projects in 2024?

Hilcorp spent approximately $24.6 million on two horizontal drilling projects in the Mancos formation during 2024.

What is the status of SJT's 2024 capital expenditure plan?

Through November 2024, Hilcorp had spent $33.6 million of the projected $34.0 million, with spending distributed across drilling, recompletions, and facilities projects.