San Juan Basin Royalty Trust Reports 97.6% Decline in Income for Q1 2026

The San Juan Basin Royalty Trust reported a significant decline in financial performance for the first quarter of 2026, with total income of $201, a decrease of 97.6% compared to $8,238 in the same period of 2025. The Trust did not receive any royalty income during this period, primarily due to ongoing Excess Production Costs and low natural gas prices. General and administrative expenses also decreased to $371,825 from $510,636 year-over-year, contributing to a distributable loss of $362,706, or $(0.007782) per unit, for the three months ended March 31, 2026.

The Trust's total assets decreased to $2,691,997 as of March 31, 2026, down from $2,700,915 at the end of 2025. Cash reserves fell to $14,380 from $23,298, while the Trust's corpus declined to $1,927,103 from $2,289,809. The Trust's liabilities increased significantly, with line of credit utilization rising to $750,514 from $387,808, reflecting the need to cover operational expenses in the absence of royalty income.

Operationally, the Trust's production volumes were impacted by a decrease in natural gas production from 7,620,893 Mcf in Q1 2025 to 6,351,787 Mcf in Q1 2026. The average natural gas price also fell from $2.99 per Mcf to $2.85 per Mcf during the same period. The Trust's capital expenditures decreased sharply from $14,047,360 to $758,570, reflecting a reduced budget from Hilcorp, the operator of the underlying assets. The cumulative balance of Excess Production Costs as of March 31, 2026, was $6,186,819, which must be recovered before any royalty income can be distributed to unit holders.

Looking ahead, the Trust's ability to continue as a going concern is in question due to the anticipated deficit in income to cover liabilities. The Trust has established a line of credit to manage operational expenses until royalty income is sufficient to cover Excess Production Costs and replenish cash reserves. Hilcorp's 2026 capital project plan includes an estimated $14 million in expenditures, with a focus on new drilling projects, but the Trust's future income remains heavily dependent on market conditions and the recovery of production costs. The Trust has not declared any distributions to unit holders since May 2024, and the outlook remains uncertain as it navigates these financial challenges.