The San Juan Basin Royalty Trust filed an 8-K on September 28, 2026, to provide additional information in response to inquiries from unit holders. The filing, furnished by the Trustee, Argent Trust Company, details changes in administrative expenses, the status of a joint interest audit, the operator's capital expenditures, and the Trust's liquidity position.
Regarding administrative expenses, the Trustee announced that starting with the Form 10-Q for the periods ending September 30, 2026, the Trust will break out year-over-year changes in general and administrative expenses by category. These categories include trustee fees, legal and professional fees, accounting and audit fees, unit holder servicing costs, and investor communication costs. The Trustee attributes a year-over-year decrease of approximately $976,000 in these expenses to the 2024 trustee transition from PNC Bank to Argent Trust Company. This decrease is due to the absence of recurring costs associated with the transition, such as legal fees and compliance costs, as well as the absorption of duties previously performed by two consultants and a reduction in Sarbanes-Oxley testing fees.
The Trustee also addressed the 2017–2020 joint interest audit adjustment. Argent inherited the audit process from PNC Bank in 2024. After consulting with the Trust's royalty auditor, outside legal counsel, and PNC Bank, the Trustee concluded that the cost of pursuing further dispute or recovery outweighed the likelihood of additional recovery. Consequently, the Trust did not pursue action beyond the adjustment already reflected in its financial statements. The Trustee noted that the royalty auditor continues to review this matter and expects to provide additional information once available. To ensure ongoing oversight, the Trustee has engaged a new royalty auditor to test joint interest billings.
The Trustee provided an update on the operator, Hilcorp, noting that the Trustee and unit holders have no authority to direct or veto Hilcorp's capital program. The Trustee maintains regular communication with Hilcorp regarding development activity and production trends but lacks visibility into internal well-level economics. The Trustee continues to monitor Hilcorp's capital expenditures and natural gas sale prices, considering the operator's obligation to act as a prudent operator.
In terms of liquidity, the Trust has a $2,000,000 credit facility with Texas Bank that matures on May 21, 2027. As of September 18, 2026, the outstanding principal balance on this line of credit was approximately $1,075,400. The Trustee is currently in discussions with Texas Bank regarding an extension, renewal, or replacement of the facility. The Trustee is also evaluating other financing sources, including commercial lenders, unit holders, and private lenders, provided any arrangement is consistent with the Trust Indenture and applicable securities laws.
Finally, the Trustee announced that it will restore national newswire distribution for the Trust's monthly press releases to ensure consistent and timely information for unit holders, prospective investors, analysts, and the financial media. Newswire distribution is expected to begin with the release for the month of October 2026.
