San Juan Basin Royalty Trust (SJT) Q3 2024 earnings summary

Executive summary

• Royalty income for Q3 2024 was $4.3 million, down from $6.9 million in Q3 2023, due to lower natural gas prices and higher production costs, including capital expenditures under Hilcorp's 2024 plan.

• Distributable income for Q3 2024 was zero, compared to $3.9 million ($0.084685 per unit) in Q3 2023; for the nine months ended September 30, 2024, distributable income fell 89% year-over-year to $5.2 million ($0.110670 per unit).

• No monthly cash distributions were declared for July, August, September, or October 2024 due to excess production costs and insufficient royalty income.

Financial highlights

• Gross proceeds from subject interests decreased 36.8% for Q3 2024 and 60.5% for the nine months ended September 30, 2024, compared to the same periods in 2023.

• Production costs exceeded gross proceeds by $10.3 million in Q3 2024 and $11.5 million for the nine months ended September 30, 2024; cumulative excess production costs to be recovered in future periods.

• Average realized natural gas price per Mcf fell from $2.04 in Q3 2023 to $1.49 in Q3 2024; oil price per barrel rose from $62.00 to $70.63.

• Natural gas production volumes decreased 5% year-over-year for Q3 2024; oil production volumes for the subject interests fell 35.7%.

Outlook and guidance

• Hilcorp's 2024 capital expenditure plan is $34 million, with $25 million allocated to two Mancos drilling projects, $8 million to 36 well recompletions/workovers, and $1 million to compression facilities.

• Trustee expects continued pressure on distributable income due to high capital spending and low commodity prices; cash reserves may be further drawn or borrowing may be required if royalty income remains insufficient.