San Juan Basin Royalty Trust: Annual Performance Review

I’ve put together this guide to help you understand how San Juan Basin Royalty Trust (SJT) performed this year. Think of this as a cheat sheet to help you decide if this investment still makes sense for your portfolio.

1. What does the Trust do and how did it perform?

The Trust is a passive investment that owns a 75% royalty interest in oil and gas properties in New Mexico. It does not drill or manage wells; it relies entirely on the operator, Hilcorp Energy Company, to manage production. The Trust collects a share of the profit and passes it to you.

The big picture: It was a difficult year. The Trust received zero royalty income in 2025, meaning no payments for investors. This is a sharp decline from 2024, when the Trust paid out about $5.2 million, or roughly $0.11 per unit.

2. Why the checks stopped

The Trust pays you only after the operator covers all costs. If operating expenses cost more than the oil and gas revenue, the Trust incurs "Excess Production Costs."

• The Debt Trap: Low natural gas prices and high operating costs left the Trust with over $6.3 million in unpaid expenses. Under the Trust’s rules, Hilcorp must pay off these debts from future profits before you receive a single cent.
• Running on Empty: The Trust’s cash reserves, used to pay for legal and accounting fees, dropped from $2.7 million at the end of 2024 to just $23,298 by the end of 2025.

3. Borrowing to stay afloat

To keep the lights on, the Trust took out a $2 million loan in May 2025. This money is used exclusively for administrative costs like audits and legal fees. You cannot receive payments until three things happen: the $2 million loan is repaid, cash reserves are refilled to $2 million, and the $6.3 million debt to the operator is cleared.

4. The "Wasting Asset" reality

The Trust is a "wasting asset," meaning its value is tied to wells that will eventually run dry. It has no control over how Hilcorp runs the wells or cuts costs. With no incoming revenue and a significant debt burden, the Trust currently cannot return any money to shareholders.

5. Key risks to your investment

• No Payouts: There is no guarantee that payments will resume.
• Debt First: All future profits must go toward paying off the $8.3 million in total debt before you see any cash.
• The 2027 Deadline: The $2 million loan is due in May 2027. If the Trust cannot pay it back by then, it may face default or be forced to shut down.
• Declining Wells: As these older wells produce less, the fixed costs to run them consume a larger portion of the revenue, making it harder to return to profitability.

Bottom Line: This is a high-risk situation. The Trust is currently borrowing money just to cover administrative expenses. Resuming payments requires a significant increase in gas prices or a substantial reduction in operating costs. Before making a decision, consider whether you are comfortable holding an asset that is currently unable to generate cash for its investors.