San Juan Basin Royalty Trust is an express trust created under the laws of the State of Texas by the San Juan Basin Royalty Trust Indenture entered into on November 1, 1980, between Southland Royalty Company and The Fort Worth National Bank. The trust holds a 75 % net overriding royalty interest in certain oil and natural gas properties located in the San Juan Basin of northwestern New Mexico. It does not operate the underlying properties and has no employees, officers, or directors; all administrative functions are carried out by the trustee. The trust’s principal office is located at 3838 Oak Lawn Avenue, Suite 1720, Dallas, Texas 75219. As of February 15, 2024, Argent Trust Company serves as trustee, having succeeded PNC Bank, National Association, which served as trustee from October 8, 2021 through February 14, 2024. The trust is governed by the indenture and the trustee’s discretionary powers, and its corpus consists of 46,608,796 units representing undivided fractional interests in the royalty.
Revenue is generated solely from the royalty interest. Under the conveyance, the trust receives 75 % of net proceeds, which equal gross proceeds from the sale of production minus production costs incurred by the operator, Hilcorp. The trust therefore does not charge customers for services; its income flows from the sale of oil and gas by the operator to third‑party purchasers. In the fiscal year ended December 31, 2024 the trust received $6.9 million of royalty income, while no royalty income was received in the fiscal year ended December 31, 2025 due to excess production costs outweighing gross proceeds. As of December 31, 2025 the trust reported excess production costs of $8,438,536 gross ($6,328,902 net to the trust), a corpus of approximately $2.3 million, and cash reserves of $23,298. The trust entered into a $2.0 million line of credit with Texas Bank on May 21, 2025 to cover operating expenses until royalty income resumes. Roughly 97.5 % of 2025 gross proceeds were attributable to natural gas production, making the trust’s revenue highly sensitive to natural gas prices, which exhibit seasonal strength in winter and summer months.
Within the oil and gas industry, San Juan Basin Royalty Trust occupies a niche as a non‑operational royalty trust that provides investors with direct exposure to commodity price movements without the risks and costs of exploration, drilling, or production. Its primary competitors are other royalty trusts and master limited partnerships that hold similar overriding royalty interests in producing basins. The trust’s competitive advantage lies in its passive structure, which eliminates operational liabilities and allows cash flows to be driven solely by the operator’s performance and market prices. However, this structure also creates dependence on the operator’s decisions, making the trust vulnerable to changes in drilling plans, cost overruns, or commodity price declines that can suppress or eliminate royalty payments. The trust’s revenue is heavily influenced by natural gas pricing, as approximately 99.1 % of its estimated proved reserves at year‑end 2025 consisted of natural gas reserves, linking distributions closely to the commodity’s market dynamics.
The trust’s immediate counterparty for royalty payments is Hilcorp, which succeeded Southland Royalty Company as the operator of the subject interests. Hilcorp remits the calculated royalty income to the trustee after deducting production costs from gross proceeds. Although the trust does not sell products directly, its revenue ultimately depends on the demand for natural gas and oil from end‑users such as utilities, industrial consumers, and residential customers. The trust’s beneficiaries, known as unit holders, receive distributions of the net royalty income after trust expenses and reserves are satisfied. Distributions are typically made monthly, with the amount determined ten days before the monthly record date and paid within ten business days thereafter, contingent on the availability of sufficient royalty income after expenses and reserve funding.