Breaking Down San Juan Basin Royalty Trust (SJT) Financial Health: Key Insights for Investors

If you are an investor in San Juan Basin Royalty Trust (SJT), let's be honest: the financial health picture is complex, and the near-term reality is stark. The Trust has declared no cash distribution for much of 2025, including the November announcement, as net proceeds are still being applied to a substantial deficit of excess production costs (the capital expenditures and operating costs that exceeded gross proceeds in prior periods). As of September 2025 production data reported in November, the cumulative balance of these excess costs was still approximately $7,839,016 net to the Trust, which must be cleared before any payout can resume, plus the Trustee needs to replenish cash reserves to a target of $2.0 million. For context, the Trust's Subject Interests only generated $4,725,794 in total revenue for September 2025, which, after deducting production costs of $3,547,190, leaves a narrow margin to chip away at that deficit, so the math tells you this is a long game. We need to defintely map out what it will take to get back to a distributable income position.

Revenue Analysis

You're looking at San Juan Basin Royalty Trust (SJT) because you want to understand its revenue, but honestly, the headline number is a major red flag right now. The Trust's financial health is under severe strain, which is directly reflected in its revenue streams. The core issue isn't a lack of production, but a structural problem with costs eating the gross proceeds.

The Trust's revenue comes almost entirely from a 75% net overriding royalty interest in oil and natural gas properties located in the San Juan Basin of New Mexico. Think of this as a net profit interest (NPI), not a gross royalty. This means the operator, Hilcorp San Juan, L.P., deducts all operating expenses and capital expenditures (CapEx) from the gross sales before calculating the Trust's share. That's the key to understanding the current situation.

The primary product is overwhelmingly natural gas, which accounted for 99.8% of the Trust's estimated proved reserves as of late 2024. Oil revenue is negligible by comparison. This makes SJT's net income highly sensitive to regional natural gas prices and the operator's spending decisions. The revenue breakdown is clear, but the net proceeds are where the trouble lies.

The year-over-year revenue growth rate is frankly shocking. For the last twelve months ending September 30, 2025, the Trust's total revenue was a mere $24.56K, representing a year-over-year decrease of -99.78%. Here's the quick math: the annual revenue for 2024 was $7.03M, which itself was an -86.83% drop from the year prior. This isn't a small dip; it's a near-total collapse of distributable revenue. You defintely need to see how this impacts investor returns by Exploring San Juan Basin Royalty Trust (SJT) Investor Profile: Who's Buying and Why?

The significant change in the revenue stream is the emergence of the Excess Production Cost (EPC). This is the structural issue. As of September 30, 2025, the net EPC balance was approximately $10.2 million. This balance accrued because Hilcorp's high CapEx, estimated at $9.0 million for 2025, combined with lower natural gas prices, exceeded the gross proceeds from production. Since May 2024, the Trust has received essentially zero net royalty income because all gross proceeds are being applied to pay down this massive EPC deficit. Until that $10.2 million is fully repaid, the Trust will not receive any distributable revenue, and distributions to unit holders will remain suspended.

For context, the gross revenue from the underlying properties for the production month of March 2025 was a healthy $6,984,564 ($6,904,591 from gas and $79,973 from oil), but that entire amount, after deducting operating costs, was applied against the EPC. The production is there, but the net profit isn't. This table shows the stark reality of the revenue shift:

The core business segment-natural gas royalty-is still producing, but the net revenue stream has been effectively shut off by the EPC. That's the real risk here.

Profitability Metrics

You need a clear picture of San Juan Basin Royalty Trust (SJT)'s financial health, especially its ability to turn royalty income into profit. The near-term data, particularly the Trailing Twelve Months (TTM) figures ending in mid-2025, show a dramatic collapse in profitability, a direct result of low natural gas prices hitting revenue while fixed costs remain high.

For the TTM period ending in June 2025, SJT reported total revenue of only $0.04 million, down sharply from the 2024 full-year revenue of $7.03 million. This revenue drop flipped the trust from a substantial profit to a significant loss. The Q3 2025 results, reported on November 13, 2025, confirmed this trend, showing revenue of just $400 and a net loss of $111,000 for the quarter.

Gross, Operating, and Net Profit Margins

As a pure royalty trust, SJT's cost structure is unique. You see this immediately in the Gross Profit Margin. Since the trust is a pass-through entity with no direct Cost of Goods Sold (COGS), its gross profit is essentially its revenue.

• Gross Profit Margin: For the TTM period ending June 2025, this margin stood at 100%. This is normal, but it hides the real problem.
• Operating Profit Margin: This is where the fixed costs hit. The TTM Operating Income was a loss of -$1.6 million on $0.04 million in revenue, resulting in an Operating Profit Margin of approximately -4,000%.
• Net Profit Margin: The TTM Net Income was a loss of -$0.16 million, translating to a Net Profit Margin of approximately -400%.

The bottom line is simple: when royalty income is minimal, the fixed administrative costs destroy all profitability.

Profitability Trends and Operational Efficiency

The trend in profitability is a clear warning sign. In 2024, when natural gas prices were higher, SJT was highly profitable, posting a Net Profit Margin of roughly 73.4% (Net Income of $5.16 million on $7.03 million in revenue). The shift to a -400% Net Profit Margin in the TTM period is a direct reflection of the extreme volatility in the natural gas market and the trust's inability to cut its fixed costs in proportion to the revenue decline.

Operational efficiency, in this context, boils down to cost management relative to revenue. The core issue is the Selling, General & Administrative (SG&A) expense. For the TTM ending June 2025, SG&A expenses were approximately $1.64 million. Here's the quick math: SG&A costs were 4,100% of the total revenue ($1.64 million / $0.04 million). This massive ratio is the reason for the negative operating income and the suspension of distributions since May 2024. [cite: 6, 8 (from step 1)]

Comparison with Industry Averages

The Oil and Gas Royalty Trust industry is generally characterized by high margins because the trusts are non-operating entities. The industry average Net Margin for the U.S. Royalty Trust sector is approximately 65.92%. SJT's 2024 Net Margin of 73.4% was actually above this average, which is great, but the TTM Net Margin of -400% shows a complete disconnect from the industry's typical performance profile. This is defintely a risk factor you must weigh, as even other trusts are facing tighter margins in 2025 due to market pressures.

To understand the fundamental purpose and structure of the trust, you should review the Mission Statement, Vision, & Core Values of San Juan Basin Royalty Trust (SJT).

Next step: Analyze the trust's cost structure to see if the SG&A can realistically be reduced, or if the only path to positive profitability is a significant, sustained recovery in natural gas prices.

Debt vs. Equity Structure

For an entity like San Juan Basin Royalty Trust (SJT), the traditional debt-versus-equity analysis is a bit different because it's a pass-through trust, not an operating company. Historically, SJT has been a pure equity vehicle, meaning its financing came entirely from the unit holders, and it carried no debt. This is the key takeaway: the trust is designed to distribute net profits, not retain earnings for growth or capital expenditure.

That model saw a critical, temporary shift in 2025. On May 21, 2025, San Juan Basin Royalty Trust secured a $2 million revolving line of credit from Texas Bank. This is a short-term financial obligation, not long-term capital financing, and it matures on May 21, 2027. The interest rate starts at 6.50%, reflecting current market conditions for this type of short-term lending.

The purpose of this debt is crucial: it's to bridge a cash flow gap. The funds are intended to cover administrative expenses and, more importantly, to repay the balance of excess production costs-which were nearly $12 million as of July 2025-and replenish the $2 million cash reserve. The debt is a means to an end, allowing the trust to eventually resume monthly distributions to unit holders.

Here's the quick math on leverage: The average Debt-to-Equity (D/E) ratio for the Oil and Gas Royalty Trust industry is 0.00, which makes sense for these non-operating entities. While SJT has historically maintained this zero-debt profile, the new line of credit pushes its leverage metric up. Some analysts have recently calculated a Total Debt-to-Equity ratio of around 11.41% (MRQ), a significant change from zero, but still a low leverage profile when compared to the trust's approximate $300 million market capitalization as of November 2025.

• Debt is temporary, not for growth.
• Equity is the primary, defintely permanent funding source.

The trust's core strategy remains equity-focused; it balances debt financing and equity funding by using the former only as an emergency measure. Once the excess production costs are fully recouped from the net profits, the debt will be paid off, and the trust will revert to its zero-debt structure, distributing all available net income to unit holders. This is a necessary, albeit temporary, deviation from their Mission Statement, Vision, & Core Values of San Juan Basin Royalty Trust (SJT).

What this estimate hides is the total liability of $22.1 million net to the Trust in excess production costs (as of January 2025) that must be cleared before the debt can be fully repaid and distributions resume. The $2 million line of credit is just the immediate cash injection to manage the trust's operating expenses while that larger deficit is worked down.

Liquidity and Solvency

You need to know if San Juan Basin Royalty Trust (SJT) has the cash to cover its short-term bills, and honestly, the picture is strained. As a passive royalty trust, SJT's principal source of liquidity is its Royalty Income, which has been non-existent for much of 2025 due to a massive deficit of excess production costs. This is a critical liquidity issue, not a minor hiccup.

The core of the problem is visible in the working capital. The Trust's Net Current Asset Value (a proxy for working capital) was reported at a negative $-162,780 for the trailing twelve months (TTM) leading up to 2025. This means current liabilities significantly exceed current assets, a clear sign of financial stress. Because the Trust operates as a pass-through entity, its liquidity position is less about internal operational efficiency and more about the cash coming in from the underlying assets. When that cash flow stops, liquidity evaporates quickly.

Current and Quick Ratios: A Near-Zero Reality

While some historical data shows higher figures, the current environment renders the traditional Current and Quick Ratios effectively near zero for the 2025 TTM. Here's the quick math on the cash on hand versus short-term debt: as of the Most Recent Quarter (MRQ), the Trust reported only $29,160 in total cash against total debt of $274,140. That's a cash-to-debt ratio of about 0.11, which is defintely not a sign of a healthy liquidity position. A ratio below 1.0 signals that the Trust cannot cover its short-term obligations with its most liquid assets.

Cash Flow Statements Overview

The cash flow statement trends for 2025 tell a story of depletion and external reliance:

• Operating Cash Flow (OCF): This has been severely negative. There was no Distributable Income for the first quarter of 2025, a sharp drop from $4.1 million in the same period of 2024. The Trust has been forced to utilize its cash reserves, which plummeted from an initial $1,541,479 to just $258,521 by March 31, 2025, just to cover administrative expenses.
• Investing Cash Flow (ICF): This is minimal, as the Trust is a passive entity. However, the operator's (Hilcorp) substantially higher capital expenditures in 2024 are the root cause of the Excess Production Costs that are currently eating up all the Royalty Income.
• Financing Cash Flow (FCF): This trend is negative, indicating a reliance on debt. In October 2025, the Trust drew $19,305 from its Line of Credit, increasing the outstanding principal balance to $293,440. This is a clear signal that the Trust is using financing activities to bridge the gap in its operating cash flow.

Near-Term Liquidity Concerns and Clear Actions

The most pressing liquidity concern is the substantial doubt raised by the Trustee about the Trust's ability to continue as a going concern within one year, as of the March 31, 2025, financial statements. This isn't just a technical term; it's a stark warning. Before Unit Holders see any distributions, the Trust must complete three critical actions:

• Repay the balance of cumulative excess production costs, which stood at approximately $8,722,969 net to the Trust as of October 2025.
• Replenish the cash reserves to the target amount of $2,000,000.
• Repay the principal and interest on the Line of Credit, currently at $293,440.

Until these three hurdles are cleared, there will be no Royalty Income distributions. Investors must monitor the monthly updates on the excess production costs balance, as that number is the single most important indicator of when liquidity will return. You can find more details on the Trust's structure and goals here: Mission Statement, Vision, & Core Values of San Juan Basin Royalty Trust (SJT).

Valuation Analysis

You're looking at San Juan Basin Royalty Trust (SJT) and trying to figure out if the recent stock price jump makes it a buy or a trap. Honestly, the valuation metrics on this royalty trust are flashing some serious caution signs right now. The short answer is: SJT looks stretched, especially when you factor in the operational realities of a royalty trust that hasn't paid a distribution in a while.

As of mid-November 2025, the stock price was around $5.88, but it had climbed a massive +61% over the past 365 days, outperforming the S&P 500 Index over that period. That's a huge move. Still, the 52-week trading range shows the volatility, with a high of $7.22 and a low of $3.66. The market is pricing in a massive rebound, but the underlying numbers don't fully support that optimism yet.

Key Valuation Multiples (FY 2025)

When we look at the core valuation ratios, the picture gets muddy, which is typical for a trust facing production and revenue challenges. Here's the quick math on the trailing twelve months (TTM) data as of November 2025:

• Price-to-Earnings (P/E): The P/E ratio is currently listed as non-applicable or negative ('-') because the trust reported negative earnings per share (EPS) on a TTM basis. You can't use a negative P/E to value a stock, so this metric is useless right now.
• Price-to-Book (P/B): This ratio is extremely high, sitting at 124.89 as of November 2025. This indicates the market is valuing the company's stock at roughly 125 times its book value (assets minus liabilities), suggesting the stock is defintely priced for perfection or that the book value of the underlying natural gas assets is severely understated.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio is also non-meaningful at -1,844.70 as of November 17, 2025. This is due to a negative TTM EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which means the trust has negative operating cash flow before non-cash charges.

The takeaway is simple: traditional valuation tools like P/E and EV/EBITDA are broken here. You must focus on the cash flow and the sustainability of the royalty payments, which is the whole point of a trust.

Dividend and Analyst Consensus

The dividend situation is the most critical near-term risk. San Juan Basin Royalty Trust has not paid a distribution since April 2024, which is a massive red flag for a royalty trust. As of November 13, 2025, the TTM dividend payout is $0.00, resulting in a 0.00% dividend yield. The payout ratio for the three months ended June 2025 was also 0.00. You are getting no income for now.

This lack of distribution, combined with the challenging financials, has led to a clear consensus among Wall Street analysts. The current analyst consensus rating for San Juan Basin Royalty Trust is a definitive Sell, with only one research report covering the stock in the past 90 days. While one rating isn't a crowd, it's a strong signal. For a more detailed look at the operational risks, check out Breaking Down San Juan Basin Royalty Trust (SJT) Financial Health: Key Insights for Investors.

Risk Factors

You're looking for a clear picture of San Juan Basin Royalty Trust (SJT) financial health, and honestly, the near-term view is dominated by one massive hurdle: the Excess Production Cost (EPC) balance. This isn't a typical business risk; it's a structural debt that must be cleared before you see another distribution.

As a royalty trust, SJT's risks are mostly external and operational, stemming from its passive nature and its reliance on the operator, Hilcorp San Juan L.P. The core issue is that the Trust cannot acquire new properties or diversify its asset base. It's a pure play on a declining asset base, which makes the volatility of natural gas prices and the operator's spending decisions the primary drivers of unitholder returns. It's a simple structure, but it carries outsized commodity and operational risk.

• Commodity prices are the single biggest variable.

The Excess Production Cost (EPC) Hurdle

The most immediate and critical financial risk is the cumulative EPC balance, which is a direct consequence of Hilcorp's aggressive 2024 horizontal drilling program. As of October 21, 2025, the balance of cumulative excess production costs net to the Trust was approximately $8,722,969. This is the first thing every net proceed dollar must pay down. Until this is fully repaid, along with replenishing a $2.0 million cash reserve and repaying the outstanding principal balance on the Texas Bank Line of Credit, which was $293,440 as of October 21, 2025, distributions remain suspended.

Here's the quick math on the recovery: Hilcorp reported total August 2025 revenue of $5,384,015 from the Subject Interests, with production costs (excluding the EPC) of $3,420,906. The difference-the net proceeds-is what goes toward the EPC. The good news is that the deficit decreased by $1,472,331 net to the Trust from the prior month as of October 21, 2025, so the recovery is happening. The bad news? It's a slow grind.

External and Structural Risks

The external risks facing San Juan Basin Royalty Trust are classic for a gas-weighted royalty interest. The average gas price for the August 2025 production month was only $2.29 per Mcf (or $2.06 per MMBtu), a decrease of $0.19 per Mcf from the prior month. Persistently low natural gas prices are the primary headwind, as they directly reduce the net proceeds available to clear the EPC and resume distributions. This is the structural risk of being tied to a commodity that has seen significant oversupply in the U.S. market.

Another major structural risk is the possibility of termination. Under the Trust's governing documents, it must dissolve if gross revenue falls below $1 million for two consecutive years. While this is a worst-case scenario, the Trust's Q1-Q3 2025 revenue was already sitting near this threshold at $1.1 million, which is a defintely a tight margin.

Mitigation and Strategic Shifts

The mitigation strategy is simple: reduce costs and wait for gas prices to rise. Fortunately, the operator, Hilcorp, has made a critical strategic shift that helps the Trust. Their 2025 capital plan is a dramatically reduced $9.0 million for 29 projects, a 73.5% reduction from the $34.0 million spent in 2024. This shift from high-cost horizontal drilling to lower-cost vertical wells and workovers is key. Reduced capital expenditures (CapEx) directly and immediately translate into higher Net Proceeds for the Trust, accelerating the EPC recovery.

For a deeper dive into who is still buying into this risk-reward profile, you should check out Exploring San Juan Basin Royalty Trust (SJT) Investor Profile: Who's Buying and Why?

Growth Opportunities

You need to look past the current distribution suspension and focus on the operator's capital plan, as that is the only real growth driver for San Juan Basin Royalty Trust (SJT). The Trust itself is a passive entity-it cannot pursue acquisitions, product innovations, or market expansions on its own. Its future is entirely dependent on the underlying asset's performance and the operator's (Hilcorp) investment decisions, plus the price of natural gas.

The near-term financial picture for 2025 is defintely challenging. For the first three quarters of 2025, the Trust's gross revenue was approximately $1.1 million, which is dangerously close to the $1 million threshold that, if sustained for two consecutive years, could trigger the Trust's dissolution. The third quarter alone reported a loss of $111,000 on revenue of just $400. This is why the monthly distribution remains suspended as of November 2025. You can read more about the investor base and the risks in Exploring San Juan Basin Royalty Trust (SJT) Investor Profile: Who's Buying and Why?.

Here's the quick math on the strategic initiatives: Hilcorp's 2025 capital expenditure (CAPEX) plan for the Subject Interests is estimated at $9.0 million. This is a significant investment that should translate into future production growth, but it must first be recouped. This spending is split across 29 projects, focusing on different formations in the San Juan Basin:

• $4.0 million for seven new vertical drill projects in the Dakota/Mesaverde formations.
• $4.5 million for 22 recompletions and workovers in the Fruitland Coal formation.
• $0.5 million for facilities projects, primarily for natural gas compression.

What this investment hides is the immediate cash flow constraint. The Trust is still working to pay down a remaining excess production cost balance, which was around $12.87 million as of April 2025, a liability from prior CAPEX. Distributions won't resume until that balance is cleared and the cash reserve is replenished.

The real opportunity is the macro tailwind and the potential production surge. Some analysts project distributable income per unit to grow by an average of 25% annually over the next five years, largely due to starting from a depressed base. The operator's 2024 CAPEX is expected to drive a production surge of nearly 70%, which, combined with improving natural gas market dynamics, could see distributions resume by mid-2026, or perhaps earlier if natural gas prices rise to $4.50 per MMBtu or higher. That's the big 'if' here. The competitive advantage is simply the location: a 75% net overriding royalty interest in a mature, established natural gas basin, which benefits from any capital efficiency improvements by a dedicated operator like Hilcorp.

To be fair, the analyst consensus is a 'Sell' rating, and one forecast suggests the stock could average $2.9597 in 2025, a potential -50.75% drop from a recent price of $6.01, so you must be a long-term, high-risk investor here. Your action is to track Hilcorp's production reports and the monthly excess cost balance, not the stock price. The only thing that matters is when that liability hits zero.