San Juan Basin Royalty Trust(SJT) - 2025 Q2 - Quarterly Report

Financial Performance - Royalty income for the six months ended June 30, 2025, was $0, compared to $6,945,974 for the same period in 2024, indicating a significant decrease of 100%[11]. - Total income for the three months ended June 30, 2025, was $2,985, down from $1,892,127 in 2024, reflecting a decline of approximately 99.84%[11]. - Distributable income (loss) for the three months ended June 30, 2025, was $(162,783), compared to a profit of $1,065,685 in 2024, marking a change of 115.3%[11]. - Royalty Income for the three months ended June 30, 2025, was $0, a decrease from $1,854,915 in the same period of 2024, primarily due to increased capital project spending[78]. - Distributable Income for the three months ended June 30, 2025, was a loss of $162,783, a decrease from a profit of $1,065,685 in the same period of 2024[86]. Assets and Liabilities - As of June 30, 2025, total assets decreased to $2,710,585 from $3,438,537 as of December 31, 2024, representing a decline of approximately 21.2%[8]. - Cash reserves as of June 30, 2025, were $32,968, significantly lower than $760,920 as of December 31, 2024, a decrease of approximately 95.7%[8]. - The trust corpus at the end of the period was $2,514,834, down from $2,677,617 at the beginning of the period, a decrease of approximately 6.1%[13]. - The Trust established a Line of Credit of $2,000,000 with Texas Bank on May 21, 2025, bearing interest at 8.5% as of June 30, 2025[29]. - As of June 30, 2025, the outstanding balance on the Line of Credit was $162,783, with $132,851 used for administrative costs in June 2025[30]. Expenses - General and administrative expenses for the six months ended June 30, 2025, totaled $901,966, compared to $1,374,870 in 2024, a reduction of about 34.4%[11]. - General and administrative expenses decreased by $367,369 (48.4%) for the three months ended June 30, 2025, compared to the same period in 2024[88]. - Trustee fees for the three-month period ending June 30, 2025, were $40,041[51]. Production and Capital Expenditures - Hilcorp's 2025 capital expenditures for the Subject Interests are estimated to be approximately $9.0 million, with $4.0 million allocated to new vertical drill projects[47]. - Hilcorp's capital expenditures for the Subject Interests were $2,509,627 and $16,556,987 for the three and six months ended June 30, 2025, reflecting increases of $1,679,755 and $14,736,321 compared to the same periods in 2024[73]. - Natural gas production increased from 5,457,753 Mcf for the three months ended June 30, 2024, to 7,085,582 Mcf for the same period in 2025, reflecting a significant rise in output[78]. - Natural gas production volumes for the Subject Interests increased by 1,627,829 Mcf (29.8%) for the three months ended June 30, 2025, compared to the same period in 2024[102]. - Oil production volumes decreased by 1,168 Bbls (13.2%) for the three months ended June 30, 2025, compared to the same period in 2024[103]. Revenue Recognition and Compliance - The Trust's financial statements are prepared on a modified cash basis, which differs from GAAP, affecting revenue recognition and expense recording[23]. - The Trust's production and sale of natural gas does not qualify for tax credit under Section 45K of the Code[35]. - The Trust's third-party compliance auditors continue to audit all payments made by Hilcorp, including adjustments and recoupments[71]. - Hilcorp's transition to a new accounting system in 2021 led to various adjustments in revenue and severance taxes, impacting the Trust's financial reporting[64]. Going Concern and Future Outlook - The Trust's financial statements raise substantial doubt about its ability to continue as a going concern[29]. - The anticipated deficit in income raises substantial doubt about the Trust's ability to continue as a going concern within one year after the issuance date of the financial statements[97]. - The Trust's ability to distribute cash is contingent upon the payment of Excess Production Costs, replenishing a cash reserve of $2,000,000, and repaying the Note in full[74]. - The Trust's financial statements do not include adjustments for potential future effects on asset recoverability and liability classifications if it cannot continue as a going concern[98]. Royalty Income and Production Costs - Cumulative Excess Production Costs as of June 30, 2025, were approximately $14,767,940 gross ($11,075,955 net to the Trust)[48]. - As of June 30, 2025, Excess Production Costs amounted to $14,767,940 ($11,075,955 net to the Trust), which must be paid in full before any Royalty Income is distributed to the Trust[74]. - Hilcorp's production costs are deducted from Gross Proceeds to calculate Net Proceeds, which are then multiplied by 75% to determine Royalty Income[70]. - Excess Production Costs contributed to a decrease in natural gas production volumes and negative volumes for the Royalty[102]. Miscellaneous - The Trust has no directors or executive officers, with Nancy Willis acting as the authorized signatory for the report[130]. - The Trust's certifications required by Rule 13a-14(a) and (b) were completed by Nancy Willis, Director of Royalty Trust Services, on August 13, 2025[126]. - The San Juan Basin Royalty Trust has filed various exhibits related to its royalty trust indenture and financial agreements, including a promissory note and mortgage with Texas Bank dated May 21, 2025[126].