Dallas, September 28th / PRNewswire / -- As the trustee of San Juan Basin Royalty Trust (hereinafter referred to as “Trust”) (New York Stock Exchange ticker: SJT), we are providing additional information today in response to inquiries from recent unit benefit holders (“Unit Holders”). The trustee stated that this move is intended to ensure that all Unit Holders and the market receive the same information at the same time, and to complement the disclosures contained in the reports and other documents submitted by the trust to the U.S. Securities and Exchange Commission (“SEC”). These relevant documents can be viewed at www.sec.gov. The trustee also encourages Unit Holders to review these materials.

Management fees. The trustee fees have been disclosed in Note 12 of the Form 10-Q and in item 11 "Executive Compensation" of the Form 10-K. Related-party transactions have been disclosed in item 13 of the Form 10-K. Starting from the Form 10-Q for the three-month and nine-month periods ending September 30, 2026, the trustee will further break down the year-over-year changes in administrative and management expenses by category, including trustee fees, legal and professional fees, accounting and auditing fees, Unit Holder service costs, and investor communication costs. In addition, the trustee will add disclosures regarding related parties to Note 12, as the only related-party transaction at present is the trustee fees.

Administrative and management expenses decreased by approximately $976,000 year-over-year, mainly due to the costs associated with the transition of trustees from PNC Bank to Argent Trust Company in 2024. This transition required the revision of the "Revised and Restated Royalty Trust Indenture" signed on December 12, 2007 (hereinafter referred to as "Revised Trust Indenture"), which necessitated a vote by Unit Holder. As a result, legal fees, compliance costs, and other professional expenses related to the transition were incurred in the previous period, but these expenses did not occur again in this period. In addition, two consultants who assisted in preparing the financial statements audit and monthly reports for PNC Bank were given a transition period after the transition. Thereafter, these responsibilities were fully assumed by the trustees, eliminating these costs. Another consultant who was responsible for conducting the "Sarbanes-Oxley Act" ("SOX") tests for PNC was replaced by consultants used by other royalty and trusts for which Argent serves as the trustee, thereby significantly reducing the expenses related to these tests.

Joint equity audit adjustments for 2017–2020. During the 2024 transition of trustees, Argent took over the joint equity audit process for the years 2017–2020 from PNC Bank, and this process is now nearing completion. The audits that were underway during the 2024 transition continued, and Argent maintained regular communication with the audit team regarding the audit findings with Hilcorp. In addition to the oil and gas royalty auditors, Argent also hired external legal counsel who had previously been employed by PNC during their tenure as trustee to review the audit and the resulting adjustments. Furthermore, PNC Bank was consulted multiple times regarding these adjustments, and their stance, along with the historical information provided by PNC, was taken into consideration by Argent and the professionals conducting the audit and review on behalf of the trust.

After the audit was completed, the trustee believed that the cost of continuing the dispute or pursuit exceeded any potential for additional recovery and scale. Therefore, no further action was taken beyond the adjustments reflected in the financial statements. Historically, the trust's auditors would audit the payments made by Hilcorp and identify any exceptions, which would then be reviewed jointly by the trust's legal counsel and the trustee to determine the next steps. The recoveries obtained in 2023 stemmed from an exception identified early in that audit process and were pursued from an early stage; whereas the audits supporting the adjustments from 2017 to 2020 had been largely completed by the time Argent took over. Regarding the related prior-period adjustments reported by the trust in 2026, the trust's auditors royalty are still reviewing the matter, and the trustee expects to provide an update once more information becomes available.

To provide continuous additional testing and supervision of the joint equity statements of the trust, the trustee has hired a new royalty auditor. As previously disclosed, the third-party compliance auditor of the trust continues to audit the payments made to the trust by Hilcorp, including sales revenue, production costs, capital expenditures, adjustments, realizations, and recoveries.

Hilcorp Capital expenditure. As the operator, Hilcorp controls the pace and scope of development in accordance with the transfer documents for the creation of net excess royalties interests from the trust (“Conveyance”). Neither the trustee nor Unit Holders has the authority to instruct or veto Hilcorp's capital plans. The trustee maintains regular and constructive communication with Hilcorp and receives periodic updates on development activities, production trends, and excess costs, but is unable to understand the internal economic situation of Hilcorp calculated per well. The trustee has exercised its rights to request updates and to inquire with Hilcorp regarding the expenditure pace and economic viability. The trustee will continue to monitor Hilcorp's capital expenditures and natural gas sales prices, and will consider the obligations assumed by Hilcorp as a prudent operator under clause 6.01 of Conveyance. The trust's disclosure of its rights regarding the level of development of Hilcorp is contained in item 1A “Risk Factors” of the 2025 Form 10-K report and subsequent documents.

Liquidity and credit limits. The trust has a credit line of $2 million with Texas Bank (“Line of Credit”), with a maturity date of May 21, 2027. According to the trust's most recent monthly press release, as of September 18, 2026, the outstanding principal balance of this credit line was approximately $1.0754 million. The trustee is in discussions with Texas Bank regarding the extension, renewal, or replacement of this line, and is also evaluating other sources of financing, including but not limited to other commercial lending institutions, Unit Holders, and private lenders. Any financing arrangement must comply with Trust Indenture and applicable securities laws, and must be fully disclosed to Unit Holders.

The main terms of this credit line were disclosed in the Form 8-K filed on May 28, 2025, as well as in the subsequent Form 10-Q and Form 10-K reports. The trustee will continue to update these disclosures on a quarterly basis. As the expiration date of May 2027 approaches, the trustee will also continue to closely monitor the liquidity of the trust and the status of the Texas Bank credit line.

Investor communication. The trustee has carefully considered the methods of distributing the trust's monthly press releases and other important communication materials, and believes that resuming distribution through a national news agency is a reasonable and worthwhile step to ensure that Unit Holders, potential investors, analysts, and financial media continue to receive consistent, timely, and widely accessible information regarding the trust.

Therefore, the trustee will resume the distribution of the trust's monthly press releases through a national news service. This is in addition to the channels already used by the trust, including publishing on the trust's website www.sjbrt.com, sending them to the existing mailing list, and including each press release as an 8-K attachment in the reports that the trust submits to SEC on a monthly basis. The trustee expects to resume distributing the press releases through this news service starting with those for October 2026.

Forward-looking statements. Except for the historical information in this press release, the statements in this press release are forward-looking statements made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements typically contain words such as “estimates,” “expects,” “may,” “plans,” or other expressions that convey uncertainty regarding future events or results. The forward-looking statements and the business prospects of San Juan Basin Royalty Trust are subject to various risks and uncertainties that could cause actual results in future periods to differ significantly from those stated in the forward-looking statements. These risks and uncertainties include, but are not limited to: certain information provided by Hilcorp to the trust, fluctuations in oil and gas prices, government regulations or actions, litigation, and uncertainties regarding reserve estimates. For a description of these and other risks, please refer to the reports and other documents submitted by the trust to the U.S. Securities and Exchange Commission.

Contact Information: San Juan Basin Royalty Trust