Commodity price volatility
Royalty income depends on realized natural gas and oil prices in the San Juan Basin.
- Scope
- Natural gas and oil sales
- Materiality
- high
San Juan Basin Royalty Trust
San Juan Basin Royalty Trust is a U.S. royalty trust that holds a net overriding royalty interest in oil and natural gas properties in the San Juan Basin of northwestern New Mexico. The trust does not operate wells itself; it receives royalty income from production on the subject interests and distributes available cash to unit holders after expenses.
| % | |
|---|---|
| Royalty income from natural gas | 75% Cash flows derived from the trust's royalty interest in natural gas production from the subject properties. |
| Royalty income from oil | 20% Cash flows derived from the trust's royalty interest in oil production from the subject properties. |
| Interest income and cash reserves | 5% Interest earned on trust cash balances and temporary reserves held by the trustee. |
The trust's economic beneficiaries are its unit holders, who receive distributions from royalty income rather than...
- Unit holdersprimary
Investors who own trust units and receive cash distributions from royalty income.
- Hilcorp Energy Companyprimary
Operator of the subject interests that produces, markets, and reports the oil and gas volumes used to calculate royalty income.
- Energy commodity market participantssecondary
Natural gas and oil market conditions determine the value of production underlying the trust's distributions.
The trust's assets are located in the San Juan Basin of northwestern New Mexico, so its cash flows are tied to a single...
- •San Juan Basin assets are located in northwestern New Mexico
- •Production is tied to a single U.S. operating basin
- •Regional gas pricing affects royalty income directly
- •Gathering-system conditions in the basin influence volumes
- •No meaningful international operating diversification
The trust's structure is designed to collect royalty income, pay trust expenses, and distribute available cash to unit...
01
Preserve and administer the royalty interestlong-term
The trust's value comes from the underlying net overriding royalty interest and the cash it generates.
02
Depend on operator execution and reportingshort-term
Production volumes, costs, and sales data from Hilcorp determine distributable income.
03
Manage exposure to basin pricing and production costsmedium-term
Natural gas pricing, oil pricing, and production costs directly affect royalty income.
The trust is highly exposed to commodity prices, basin-specific production trends, and the operator's cost structure...
Single-asset geographic concentration
The trust's principal asset is tied to one producing basin in New Mexico.
- Scope
- San Juan Basin
- Materiality
- high
Excess production costs
Production costs must be recovered before royalty income is again paid to the trust.
- Scope
- Net proceeds and distributions
- Materiality
- high
Operator dependence
Hilcorp controls production, marketing, and reporting for the subject interests.
- Scope
- Operational and reporting accuracy
- Materiality
- high
Royalty income recognition timing
Can create quarter-to-quarter volatility in reported income
Excess production cost recovery
Can suppress distributable income even when production exists
Operator-reported estimates and settlements
Audit settlements and reporting adjustments can affect income
Interest income on cash reserves
Affects distributable income when royalty income is low
: 29.4.2026