SJT Faces Going Concern Doubt Amid Zero Royalty Income, Secures Loan

TL;DR

**SJT is bleeding cash and borrowing to stay afloat; distributions are dead until they can somehow restart royalty income.**

AI Summary

San Juan Basin Royalty Trust (SJT) reported a significant decline in distributable income for the three and six months ended June 30, 2025, primarily due to zero royalty income. For the three months ended June 30, 2025, the Trust recorded a distributable loss of $162,783, a sharp contrast to the $1,065,685 distributable income in the same period of 2024. Similarly, for the six months ended June 30, 2025, the distributable loss was $162,783, down from $5,158,229 in 2024. Cash and short-term investments plummeted from $760,920 at December 31, 2024, to $32,968 at June 30, 2025. To cover administrative expenses amid the lack of royalty income, the Trust secured a $2,000,000 line of credit with Texas Bank on May 21, 2025, utilizing $162,783 by June 30, 2025. This financial strain has led the Trustee to express substantial doubt about the Trust's ability to continue as a going concern within one year.

Why It Matters

This filing signals severe financial distress for SJT, directly impacting investors who rely on distributions. The complete cessation of royalty income and the need for a $2 million line of credit from Texas Bank to cover administrative expenses highlight a critical operational failure. This situation puts SJT at a significant competitive disadvantage against other energy trusts that are actively generating revenue, potentially leading to a loss of investor confidence and a re-evaluation of the trust's long-term viability. Employees and customers are less directly affected as the Trust is a passive royalty holder, but the broader market may see this as a cautionary tale for similar passive investment vehicles in the energy sector.

Risk Assessment

Risk Level: high — The Trust reported zero royalty income for the three and six months ended June 30, 2025, a drastic decline from $1,854,914 and $6,945,974 respectively in the prior year periods. This lack of income, coupled with a cash reserve balance of only $32,968 at June 30, 2025, and the necessity of drawing $162,783 from a new $2,000,000 line of credit, raises 'substantial doubt about the Trust’s ability to continue as a going concern within one year.'

Analyst Insight

Investors should immediately re-evaluate their holdings in SJT, considering the expressed 'substantial doubt' about its going concern ability and the complete halt of distributions. Given the reliance on future royalty income to repay the $2,000,000 line of credit and resume distributions, a wait-and-see approach is highly speculative; consider divesting to mitigate further losses.

Financial Highlights

debt To Equity

N/A

revenue

$11,223

operating Margin

N/A

total Assets

$2,514,834

total Debt

$162,783

net Income

$-162,783

eps

$-0.003493

gross Margin

N/A

cash Position

$32,968

revenue Growth

-99.8%

Revenue Breakdown

Key Numbers

• $162,783 — Distributable Loss (for the three and six months ended June 30, 2025, compared to positive income in 2024)
• $0 — Royalty Income (for the three and six months ended June 30, 2025, a significant drop from 2024)
• $32,968 — Cash and short-term investments (at June 30, 2025, down from $760,920 at December 31, 2024)
• $2,000,000 — Line of Credit (established with Texas Bank to cover administrative expenses)
• $162,783 — Line of Credit Utilization (outstanding balance as of June 30, 2025)
• 46,608,796 — Units of beneficial interest (outstanding at August 13, 2025)
• 8.5% — Interest Rate (on the Line of Credit at June 30, 2025 (prime plus 1%))

Key Players & Entities

• SAN JUAN BASIN ROYALTY TRUST (company) — registrant
• Argent Trust Company (company) — Trustee since February 15, 2024
• Hilcorp San Juan L.P. (company) — owner of Subject Interests
• Texas Bank (company) — lender for the $2,000,000 line of credit
• PNC Bank (company) — former Trustee from October 8, 2021, through February 14, 2024
• Southland Royalty Company (company) — original conveyor of the royalty interest
• New York Stock Exchange (regulator) — where SJT Units are traded
• Securities and Exchange Commission (regulator) — regulates the Trust's filings

FAQ

Risk Factors

• Deterioration of Financial Condition [high — financial]: The Trust reported a distributable loss of $162,783 for the six months ended June 30, 2025, a drastic decline from $5,158,229 in the prior year, driven by zero royalty income. Cash and short-term investments have fallen from $760,920 to $32,968.
• Going Concern Uncertainty [high — financial]: The Trustee has expressed substantial doubt about the Trust's ability to continue as a going concern within one year due to the severe financial strain and lack of operational revenue. A $2,000,000 line of credit was established to cover administrative expenses.
• Dependence on Royalty Income [high — operational]: The Trust's entire revenue stream is derived from royalty income, which was $0 for the first six months of 2025. This complete cessation of income highlights a critical operational risk and lack of diversification.
• Line of Credit Utilization [medium — financial]: The Trust has drawn $162,783 on its $2,000,000 line of credit to meet administrative expenses. This indicates a reliance on debt financing to sustain operations in the absence of revenue.
• Trustee Responsibilities [medium — regulatory]: The Trustee has a fiduciary duty to manage the Trust's assets and operations. The current financial distress and going concern issues place significant scrutiny on the Trustee's actions and decisions.

Industry Context

The San Juan Basin Royalty Trust operates in the oil and gas royalty sector, which is highly sensitive to commodity prices and production volumes. The industry faces ongoing challenges related to regulatory changes, environmental concerns, and the transition to renewable energy sources. Companies in this sector are often characterized by their dependence on existing reserves and the need for efficient production management.

Regulatory Implications

The Trust's severe financial distress and going concern issues may attract increased scrutiny from regulatory bodies and exchanges regarding its continued listing and disclosure obligations. The Trustee's actions in managing the Trust's liquidity and operational challenges will be critical for compliance.

What Investors Should Do

1. Monitor production and royalty income trends closely.
2. Evaluate the terms and sustainability of the line of credit.
3. Assess the Trustee's strategy for addressing the going concern issue.
4. Consider the implications of zero distributions.

Key Dates

• 2025-05-21: Line of Credit Established — The Trust secured a $2,000,000 line of credit with Texas Bank to address the severe cash crunch caused by zero royalty income.
• 2025-06-30: Reporting Period End — The 10-Q filing covers the financial performance for the three and six months ended this date, revealing a significant distributable loss and depleted cash reserves.
• 1980-11-01: Trust Established — The San Juan Basin Royalty Trust was created, conveying a 75% net overriding royalty interest, marking the origin of the Trust's operations.

Glossary

Distributable income (Loss)

The income available for distribution to the Trust's unit holders after deducting operating expenses and other charges. (This is the key metric for unit holders, and its significant decline to a loss indicates a severe negative impact on distributions.)

Royalty income

Income received by the Trust from its overriding royalty interest in oil and gas properties. (The complete absence of this income for the reporting period is the primary driver of the Trust's financial distress.)

Trust corpus

The principal assets of the Trust, which are managed for the benefit of the unit holders. (The Trust corpus has decreased due to the distributable loss, reflecting the erosion of the Trust's capital.)

Going concern

The assumption that a company will continue to operate for the foreseeable future, typically at least 12 months. (The Trustee's doubt about the Trust's ability to continue as a going concern is a critical warning sign for investors.)

Net overriding royalty interest

A non-operating interest in the gross production of oil and gas, free of the costs of production but subject to other burdens. (This is the primary asset of the Trust, and its performance directly dictates the Trust's financial results.)

Year-Over-Year Comparison

Compared to the prior year, the San Juan Basin Royalty Trust has experienced a catastrophic decline in financial performance. For the six months ended June 30, 2025, royalty income has fallen to $0 from $6,945,974 in 2024, resulting in a distributable loss of $162,783 compared to a substantial income of $5,158,229. This has led to a drastic reduction in cash and short-term investments and prompted the establishment of a line of credit, a situation not present in the previous year's filing.

Key Financial Figures

• $130,597,911 — ies (net of accumulated amortization of $130,597,911 at June 30, 2025 and December 31, 2024)
• $1.0 million — ch of two successive years is less than $1.0 million per year or (ii) the Unit Holders of at
• $133,275,528 — nitial carrying value of the Royalty of $133,275,528 represented Southland’s historic
• $32,968 — not cover. The cash reserve balance was $32,968 on June 30, 2025. The anticipated def
• $2,000,000 — ine of Credit”) in the amount of $2,000,000 with Texas Bank, together with a mortga
• $29,932 — beneficial interest. The Trust utilized $29,932 in May 2025 to cover administrative fee
• $132,851 — d with obtaining the Line of Credit and $132,851 in June 2025 to help cover Trust admini
• $162,783 — nding balance on the Line of Credit was $162,783. The accompanying financial statement
• $1,037,093 — Hilcorp’s payment of the sum of $1,037,093, which included the accumulated interes

Filing Documents

• sjt_10q_63025.htm (10-Q) — 645KB
• sjt-ex10_1.htm (EX-10.1) — 89KB
• sjt-ex10_2.htm (EX-10.2) — 1851KB
• sjt-ex31.htm (EX-31) — 15KB
• sjt-ex32.htm (EX-32) — 14KB
• img81425288_0.jpg (GRAPHIC) — 21KB
• img81425288_1.jpg (GRAPHIC) — 2KB
• img81425288_2.jpg (GRAPHIC) — 1KB
• img81425288_3.jpg (GRAPHIC) — 1KB
• 0000950170-25-107938.txt ( ) — 2652KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION Item 1

Financial Statements

Financial Statements 1 Item 2 Trustee’s Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3

Quantitative and Qualitative Disclosures about Market Risk

Quantitative and Qualitative Disclosures about Market Risk 17 Item 4

Controls and Procedures

Controls and Procedures 17

OTHER INFORMATION

PART II. OTHER INFORMATION Item 1

Legal Proceedings

Legal Proceedings 18 Item 1A

Risk Factors

Risk Factors 18 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 18 Item 3 Defaults Upon Senior Securities 18 Item 4 Mine Safety Disclosures 18 Item 5 Other Information 18 Item 6 Exhibits 19 SIGNATURE Table of Contents SAN JUAN BASIN ROYALTY TRUST PA RT I FINANCIAL INFORMATION

Fin ancial Statements

Item 1. Fin ancial Statements. CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS June 30, December 31, 2025 2024 (Unaudited) (Audited) ASSETS Cash and short-term investments $ 32,968 $ 760,920 Net overriding royalty interest in producing oil and gas properties (net of accumulated amortization of $130,597,911 at June 30, 2025 and December 31, 2024) 2,677,617 2,677,617 $ 2,710,585 $ 3,438,537 LIABILITIES AND TRUST CORPUS Distribution payable to Unit Holders $ — $ — Cash reserves (1) 32,968 760,920 Line of credit utilization 162,783 — Trust corpus – 46,608,796 Units of beneficial interest authorized and outstanding 2,514,834 2,677,617 $ 2,710,585 $ 3,438,537 (1) The Trustee is authorized to determine the amount of cash reserves it retains from distributions received by the Trust to be used in the event cash on hand is not sufficient to pay ordinary course general and administrative expenses and to provide for future liabilities of the Trust. These Condensed Financial Statements should be read in conjunction with the accompanying

Notes to Financial Statements included herein

Notes to Financial Statements included herein. 1 Table of Contents CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Royalty income $ — $ 1,854,914 $ — $ 6,945,974 Interest income 2,985 37,213 11,223 54,868 Total income 2,985 1,892,127 11,223 7,000,842 General and administrative expenses (391,330 ) (758,699 ) (901,966 ) (1,374,870 ) Cash reserves/line of credit (withheld) used for Trust expenses 225,562 (67,743 ) 727,960 (467,743 ) Distributable income (Loss) $ (162,783 ) $ 1,065,685 $ (162,783 ) $ 5,158,229 Distributable income (Loss) per Unit (46,608,796 Units) $ (0.003493 ) $ 0.022864 $ (0.003493 ) $ 0.110671 These Condensed Financial Statements should be read in conjunction with the accompanying

Notes to Financial Statements included herein

Notes to Financial Statements included herein. 2 Table of Contents CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED) Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Trust corpus, beginning of period $ 2,677,617 $ 2,703,773 $ 2,677,617 $ 2,753,249 Amortization of net overriding royalty interest — (26,156 ) — (75,632 ) Distributable income (Loss) (162,783 ) 1,065,685 (162,783 ) 5,158,207 Distributions declared — (1,065,685 ) — (5,158,207 ) Trust corpus, end of period $ 2,514,834 $ 2,677,617 $ 2,514,834 $ 2,677,617 Distributions declared (per Unit) $ — $ 0.022864 $ — $ 0.110671 These Condensed Financial Statements should be read in conjunction with the accompanying

Notes to Financial Statements included herein

Notes to Financial Statements included herein. 3 Table of Contents

Notes to Financial Statements

Notes to Financial Statements 1. Trust Organization and Administration The San Juan Basin Royalty Trust (the “Trust”) was established on November 1, 1980 when Southland Royalty Company (“Southland”) conveyed to the Trust a 75% net overriding royalty interest (the “Royalty”) that burdens certain oil and gas interests (the “Subject Interests”) in properties owned by Southland and located in the San Juan Basin of northwestern New Mexico. Subsequent to the conveyance of the Royalty, through a series of sales, assignments and mergers, Southland’s successor became Hilcorp San Juan L.P. (“Hilcorp”), which acquired the Subject Interests from Burlington Resources Oil & Gas Company LP (“Burlington”) on July 31, 2017. Through an acquisition completed on March 24, 2006, Compass Bank succeeded TexasBank as trustee of the Trust. On September 7, 2007, Compass Bancshares, Inc. was acquired by Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”) and became a wholly-owned subsidiary of BBVA. Effective June 10, 2019, Compass Bank changed its name to BBVA USA. On June 1, 2021, The PNC Financial Services Group, Inc. (“PNC”) announced that it had completed the purchase of BBVA USA Bancshares, Inc., a financial holding company, including its U.S. banking subsidiary, BBVA USA, an Alabama-chartered bank and trustee of the Trust (“BBVA USA”). On October 8, 2021, PNC Bank, an indirect wholly-owned subsidiary of PNC, succeeded BBVA USA as the trustee of the Trust following BBVA USA’s merger with and into PNC Bank. On February 15, 2024, Argent Trust Company succeeded PNC Bank as the trustee of the Trust following the resignation of PNC Bank. The defined term “Trustee” as used herein shall refer to PNC Bank for periods from October 8, 2021 through February 14, 2024, and shall refer to Argent Trust Company for periods on and after February 15, 2

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