San Juan Basin Royalty Trust (SJT) Q4 2024 earnings summary

Executive summary

• Royalty Income for 2024 fell sharply to $6.9 million from $53.2 million in 2023, driven by lower natural gas prices and significantly higher capital expenditures, resulting in Excess Production Costs that halted distributions after April 2024.

• Distributable Income dropped to $5.2 million ($0.11 per unit) in 2024 from $51.6 million ($1.11 per unit) in 2023; no distributions were made from May through December 2024.

• The Trust incurred Excess Production Costs of $21.2 million gross ($15.9 million net) in 2024, which must be recovered before future Royalty Income and distributions resume.

• Cash reserves were drawn down to $0.76 million by year-end 2024, with further depletion expected; the Trustee is evaluating borrowing options to cover ongoing expenses.

• The Trust's ability to continue as a going concern is in doubt due to the income deficit and depleted cash reserves.

Financial highlights

• Gross Proceeds from Subject Interests decreased 57% to $48.9 million in 2024 from $114.5 million in 2023, primarily due to lower natural gas prices.

• Capital expenditures rose to $23.9 million in 2024 from $2.2 million in 2023, mainly for two new horizontal wells.

• Lease operating expenses and property taxes increased 12.7% to $30.8 million in 2024.

• Average natural gas price received dropped to $2.07 per Mcf in 2024 from $4.69 per Mcf in 2023; oil price increased slightly to $68.07 per Bbl.

• Proved reserves as of December 31, 2024, were 62,095 MMcf of natural gas and 132 MBbls of oil, with no proved undeveloped reserves remaining.

Outlook and guidance

• Hilcorp's 2025 capital expenditure plan is $9.0 million, down from 2024, with 29 projects focused on new vertical drilling and recompletions.

• Distributions will not resume until Excess Production Costs are recovered and cash reserves are replenished; the Trust may need to borrow to cover expenses if reserves are depleted.

• If gross revenue remains below $1 million for two consecutive years, the Trust faces mandatory termination.