SAN JUAN BASIN ROYALTY TRUST 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm PNC Bank, National Association, Trustee San Juan Basin Royalty Trust Opinion on the Financial Statements We have audited the accompanying statements of assets, liabilities, and trust corpus of San Juan Basin Royalty Trust (“the Trust”) as of December 31, 2022 and 2021, and the related statements of distributable income and changes in trust corpus for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the assets, liabilities and trust corpus of San Juan Basin Royalty Trust as of December 31, 2022 and 2021, and its distributable income and changes in trust corpus for the years then ended, on the basis of accounting described in Note 3 to the financial statements. As described in Note 3 to the financial statements, these financial statements were prepared on a modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Trustee. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to San Juan Basin Royalty Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. 15 Table of Contents We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. WEAVER AND TIDWELL, L.L.P. We have served as San Juan Basin Royalty Trust’s auditor since 2001. Austin, Texas March 31, 2023 16 Table of Contents FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Statements of Assets, Liabilities, and Trust Corpus 2022 2021 Assets Cash and Short-Term Investments $ 5,488,194 $ 6,240,726 Net Overriding Royalty Interests in Producing Oil and Gas Properties – Net 2,968,707 3,690,847 TOTAL $ 8,456,901 $ 9,931,573 2022 2021 Liabilities & Trust Corpus Distribution Payable to Unit Holders $ 4,488,194 $ 5,240,726 Cash Reserves 1,000,000 1,000,000 Trust Corpus – 46,608,796 Units of Beneficial Interest Authorized and Outstanding 2,968,707 3,690,847 TOTAL $ 8,456,901 $ 9,931,573 Statements of Distributable Income December 31, 2022 and 2021 2022 2021 Royalty Income $ 79,008,985 $ 37,623,612 Interest Income 57,186 1,150 Total Income 79,066,171 37,624,762 Expenditures – General and Administrative 1,466,718 1,654,674 Distributable Income $ 77,599,453 $ 35,970,088 Distributable Income per Unit (46,608,796 Units) $ 1.664908 $ 0.771744 Statements of Changes in Trust Corpus December 31, 2022 and 2021 2022 2021 Trust Corpus, Beginning of Period $ 3,690,847 $ 5,123,834 Amortization of Net Overriding Royalty Interest (722,140 ) (1,432,987 ) Distributable Income 77,599,453 35,970,088 Distributions Declared (77,599,453 ) (35,970,088 ) Trust Corpus, End of Period $ 2,968,707 $ 3,690,847 Distributable Income per Unit (46,608,796 Units) $ 1.664908 $ 0.771744 These Financial Statements should be read in conjunction with the accompanying Notes to Financial Statements included herein. 17 Table of Contents Notes to Financial Statements 1. Trust Organization and Provisions The Trust was established on November 1, 1980. Southland conveyed to the Trust the Royalty that burdens the Subject Interests in properties located in the San Juan Basin. Subsequent to the Conveyance of the Royalty, through a series of sales, assignments and mergers, Southland’s successor became Hilcorp, which acquired the Subject Interests from Burlington on July 31, 2017. Burlington is an indirect wholly-owned subsidiary of ConocoPhillips. Through an acquisition completed on March 24, 2006, Compass Bank succeeded TexasBank as “Trustee” (herein so called) of the Trust. On September 7, 2007, Compass Bancshares, Inc. was acquired by Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA”) and became a wholly-owned subsidiary of BBVA. Effective June 10, 2019, Compass Bank changed its name to BBVA USA. On June 1, 2021, The PNC Financial Services Group, Inc. (“PNC”) announced that it had completed the purchase of BBVA USA Bancshares, Inc., a financial holding company, including its U.S. banking subsidiary, BBVA USA, an Alabama-chartered bank and trustee of the Trust (“BBVA USA”). On October 8, 2021, PNC Bank, an indirect wholly-owned subsidiary of PNC, succeeded BBVA USA as the trustee of the Trust following BBVA USA’s merger with and into PNC Bank. On November 3, 1980, 46,608,796 Units in the Trust were distributed to the Trustee for the benefit of Southland shareholders of record as of November 3, 1980, who received one Unit in the Trust for each share of Southland common stock held. The Trust’s initial public offering was completed in 1980. The Units are traded on the New York Stock Exchange. Holders of Units are referred to herein as “Unit Holders.” The terms of the Trust Indenture provide, among other things, that: • The Trust shall not engage in any business or commercial activity of any kind or acquire any assets other than those initially conveyed to the Trust; • The Trustee may sell up to one percent (1%) of the value (based on prior year engineering reports) of the Royalty in any 12-month period, but otherwise may not sell all or any part of the Royalty unless approved by holders of 75% of all Units outstanding. In either case, the sale must be for cash and the proceeds promptly distributed; • The Trustee may establish a cash reserve for the payment of any liability which is contingent or uncertain in amount; • The Trustee is authorized to borrow funds to pay liabilities of the Trust; • The Trustee will make monthly cash distributions to Unit Holders (see Note 2); and • The Trust will generally terminate upon the first to occur of the following events: (i) at such time as the Trust’s gross revenue for each of two successive years is less than $1.0 million per year or (ii) the Unit Holders of at least 75% of all of the Units outstanding vote in favor of termination. 2. Net Overriding Royalty Interest and Distribution to Unit Holders The amounts to be distributed to Unit Holders (“Monthly Distribution Amounts”) are determined on a monthly basis by the Trustee. The Monthly Distribution Amount is an amount equal to the sum of cash received by the Trustee during a calendar month attributable to the Royalty, any reduction in cash reserves and any other cash receipts of the Trust, including interest, reduced by the sum of liabilities paid and any increase in cash reserves. If the Monthly Distribution Amount for any monthly period is a negative number, then the distribution will be zero for such month and such negative amount will be carried forward and deducted from future monthly distributions until the cumulative distribution calculation becomes a positive number, at which time a distribution will be made. Unit Holders of record will be entitled to receive the calculated Monthly Distribution Amount for each month on or before 10 business days after the monthly record date, which is generally the last business day of each calendar month. The cash received by the Trustee consists of the Net Proceeds generated by the owner of the Subject Interests multiplied by 75%. The initial carrying value of the Royalty of $133,275,528 represented Southland’s historical net book value at the date of the transfer of the Trust. Accumulated amortization as of December 31, 2022 and 2021 were $130,306,821 and $129,584,681, respectively. 3. Basis of Accounting The financial statements of the Trust are prepared on the following basis and are not intended to present financial position and results of operations in conformity with U.S. generally accepted accounting principles: • The Royalty Income recorded for a month is the amount computed and paid by the owner of the Subject Interests, Hilcorp, the present owner of the Subject Interests, to the Trustee for the Trust. Royalty Income consists of the Net Proceeds generated by Hilcorp, multiplied by 75%. The calculation of Net Proceeds by Hilcorp for any month includes true-ups and adjustments to Net Proceeds for prior months and impacts the Royalty Income paid to the Trust and the distribution to Unit Holders for that month. • Although permitted under the Conveyance, Hilcorp has informed the Trust that, for wells operated by Hilcorp, it generally did not intend to accrue lease operating expenses to the Trust. 18 Table of Contents • Hilcorp has informed the Trust that oil revenue is typically reported to the Trust based on actual volumes and pricing. • Trust expenses recorded are based on liabilities paid and cash reserves established from Royalty Income for liabilities and contingencies. • Distributions to Unit Holders are recorded when declared by the Trustee. • The conveyance which transferred the Royalty to the Trust provides that any excess of production costs applicable to the Subject Interests over Gross Proceeds from such properties must be recovered from future Net Proceeds before Royalty Income is again paid to the Trust. • Depletion and any impairment are recorded as a reduction in trust corpus instead of an expense. The financial statements of the Trust differ from financial statements prepared in accordance with GAAP because revenues are not accrued in the month of production; certain cash reserves may be established for liabilities and contingencies which would not be accrued in financial statements prepared in accordance with GAAP; expenses are recorded when paid instead of when incurred; and amortization of the Royalty calculated on a unit-of-production basis is charged directly to trust corpus instead of as an expense. Most accounting pronouncements apply to entities whose financial statements are prepared in accordance with GAAP, directing such entities to accrue or defer revenues and expenses in a period other than when such revenues were received or expenses were paid. Because the Trust’s financial statements are prepared on the modified cash basis, as described above, most accounting pronouncements are not applicable to the Trust’s financial statements. This comprehensive basis of accounting corresponds to the accounting permitted for royalty trusts by the U.S. Securities and Exchange Commission, as specified by Staff Accounting Bulletin Topic 12:E, Financial Statements of Royalty Trusts. The Trustee routinely reviews its royalty interests in oil and gas properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trust’s royalty interests may not be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the royalty interests exceeds the fair value of these assets, which would likely be measured by discounting projected cash flows and recorded as a reduction of trust corpus. There was no impairment of the assets as of December 31, 2022 or 2021. 4. Federal Income Taxes For federal income tax purposes, the Trust constitutes a fixed investment trust which is taxed as a Grantor Trust. A Grantor Trust is not subject to tax at the trust level. The Unit Holders are considered to own the Trust’s income and principal as though no trust were in existence. The income of the Trust is deemed to have been received or accrued by each Unit Holder at the time such income is received or accrued by the Trust rather than when distributed by the Trust. The Trust is a WHFIT classified as a NMWHFIT for federal income tax purposes. The Trustee is the representative of the Trust that will provide tax information in accordance with the applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT and a NMWHFIT. The Royalty constitutes an “economic interest” in oil and natural gas properties for federal income tax purposes. Unit Holders must report their share of the production revenues of the Trust as ordinary income from oil and natural gas royalties and are entitled to claim depletion with respect to such income. The Royalty is treated as a single property for depletion purposes. The Trust has on file technical advice memoranda confirming such tax treatment. Under present law, the Trust’s production and sale of natural gas from Coal Seam Wells does not qualify for tax credit under Section 45K of the Code (the “Section 45 Tax Credit”). Congress has at various times since 2002 considered energy legislation, including provisions to reinstate the Section 45 Tax Credit in various ways and to various extents, but no legislation that would qualify the Trust’s current production for such credit has been enacted. No prediction can be made as to what future tax legislation affecting Section 45K of the Code may be proposed or enacted or, if enacted, its impact, if any, on the Trust and the Unit Holders. The classification of the Trust’s income for purposes of the passive loss rules may be important to a Unit Holder. As a result of the Tax Reform Act of 1986, royalty income such as that derived through the Trust will generally be treated as portfolio income that may not be offset or reduced by passive losses. Tax positions taken by the Trust related to the Trust’s pass-through status and state tax positions have been reviewed, and the Trustee is of the opinion that material positions taken would more likely than not be sustained by examination. As of December 31, 2022, the Trust’s tax years 2019 and thereafter remain subject to examination. 19 Table of Contents 5. Certain Contracts As part of the transition from Burlington to Hilcorp, Hilcorp has assumed, or been assigned, all the natural gas purchase, gathering and processing contracts affecting the Subject Interests. Natural gas produced from the Subject Interests is processed at the following sites: Chaco, Val Verde, Milagro, Ignacio or Kutz plants, all located in the San Juan Basin. Hilcorp sells natural gas produced from the Subject Interests under various contracts. The Trust is not a party to any of the purchase, gathering or processing contracts, and thus the Trust has limited knowledge over the terms of the various contracts and lacks the ability to influence such terms. As part of the 1996 settlement of litigation filed by the Trustee in 1992 against Burlington and Southland, the Trustee and Burlington established a formal protocol pursuant to which compliance auditors, retained by the Trustee, have access to Burlington and its successors’ books and records, which protocol has been adopted by Hilcorp. 6. Significant Customers Information as to significant purchasers of oil and natural gas production attributable to the Trust’s economic interests is included in Note 5 above. 7. Development Costs Hilcorp’s capital budget plans for the Subject Interests are delivered to the Trustee at the beginning of each calendar year. The estimates are subject to change, based on, among other things, Hilcorp’s actual capital requirements, the pace of regulatory approvals, the mix of projects and swings in the price of natural gas. Both the estimated annual capital expenditures and the actual expenses reported by Hilcorp include amounts attributable to capital budgets for prior years because capital expenditures are deducted in calculating Royalty Income in the month they accrue and projects within a given year’s budget often extend into subsequent years. Further, Hilcorp’s accounting period for capital expenditures runs from January through December 31 of each calendar year, which corresponds and is reported in Trust Distribution months March of the same calendar year through February of the following calendar year. In addition, with respect to wells not operated by Hilcorp, Hilcorp’s share of capital expenditures may not be paid until the following year(s) after those expenses were incurred by the operator. Hilcorp’s 2022 capital expenditures plan for the Subject Interests estimated capital expenditures of $1.9 million for well recompletions and workovers, for facility projects primarily related to natural gas compression, and for permitting and surveying costs for future new drill projects. Actual capital expenditures of approximately $1.0 million were included in calculating royalty income paid to the Trust in calendar year 2022. Hilcorp estimated its 2021 capital expenditure budget at $0.3 million. Actual capital expenditures of approximately $0.3 million were included in calculating royalty income paid to the Trust in calendar year 2021. On January 20, 2021, President Biden signed an executive order that reversed the United States’ withdrawal from the Paris Agreement, and the United States formally rejoined the Paris Agreement on February 19, 2021. At the federal regulatory level, both the EPA and the BLM have adopted regulations for the control of methane emissions, which also include leak detection and repair requirements, from the oil and gas industry. Additionally, President Biden has issued an executive order seeking to adopt new regulations and policies to address climate change and suspend, revise or rescind prior agency actions that are identified as conflicting with the Biden Administration’s climate policies. In addition, President Biden has declared that he supports federal government efforts to limit or prohibit hydraulic fracturing and banning new leases for production of minerals on federal properties, including onshore lands. Any of these actions could require Hilcorp to increase capital expenditures for the Subject Interests, decrease demand for natural gas and oil production, or limit the Subject Interests’ ability to produce natural gas or oil production. The Trust is unable to determine what, if any, the effects of such actions will have on the Subject Interests’ ability to produce natural gas and oil, and Hilcorp’s ability to pay royalty income to the Trust. 8. Settlements and Litigation None. 9. Supplemental Oil and Gas Reserve Information (Unaudited) Proved Oil and Natural Gas Reserves Proved oil and gas reserves have been estimated by independent petroleum engineers. Proved reserves are those quantities of oil and natural gas, which, by analysis of geoscience and engineering data can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulation before the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain. Proved developed reserves are the quantities expected to be recovered through existing wells with existing equipment and operating methods in which the cost of the required equipment is relatively minor compared with the cost of a new well. Due to the inherent uncertainties and the limited nature of reservoir data, such estimates are subject to change as additional information becomes available. The reserves actually recovered and the timing of production of these reserves may be substantially different from the original estimate. Revisions result primarily from new information obtained from development drilling and production history and from changes in economic factors. 20 Table of Contents The following table presents a reconciliation of proved reserve quantities attributable to the Royalty from December 31, 2019, to December 31, 2022: Crude Oil and Condensate (MBbls) Natural Gas (MMcf) Reserves as of December 31, 2019 172 49,334 Revisions of previous estimates 3 (7,773 ) Extensions, discoveries and other additions — — Production (28 ) (3,558 ) Reserves as of December 31, 2020 147 38,003 Revisions of previous estimates 116 56,309 Extensions, discoveries and other additions 2 859 Production (31 ) (11,029 ) Reserves as of December 31, 2021 234 84,142 Revisions of previous estimates 141 75,085 Extensions, discoveries and other additions 2 1,386 Production (24 ) (13,972 ) Reserves as of December 31, 2022 353 146,641 21 Table of Contents Standardized Measure of Discounted Future Net Cash Flows The following is a summary of a standardized measure of discounted future net cash flows related to the Trust’s total proved natural gas and oil reserve quantities. Information presented is based upon valuation of proved reserves by using discounted cash flows based upon average oil and gas prices during the 12-month period prior to the fiscal year-end, determined as an unweighted arithmetic average of the first-day-of-the-month price for each month within such period, unless prices are defined by contractual arrangements, excluding escalations based upon future conditions and severance and ad valorem taxes, if any, and economic conditions, discounted at the required rate of 10%. As the Trust is not subject to taxation at the trust level, no provision for income taxes has been made in the following disclosure. Trust prices may differ from posted New York Mercantile Exchange prices due to differences in product quality and property location. The impact of changes in current prices on reserves could vary significantly from year to year. Accordingly, the information presented below should not be viewed as an estimate of the fair market value of the Trust’s oil and natural gas reserves or the costs that would be incurred to acquire equivalent reserves. A market value determination would require the analysis of additional parameters. December 31, 2022 2021 (in thousands) Future cash inflows $ 939,104 $ 278,614 Future costs (109,968 ) (31,683 ) Future net cash flows $ 829,136 $ 246,931 Discount of future net cash flows at 10% (432,251 ) (112,704 ) Standardized measure of discounted future net cash flows $ 396,885 $ 134,227 Estimates of proved oil and natural gas reserves are by their nature imprecise. Estimates of future net revenue attributable to proved reserves are sensitive to the unpredictable prices of oil and natural gas and other variables. Accordingly, under the allocation method used to derive the Trust’s quantity of proved reserves, changes in prices will result in changes in quantities of proved oil and natural gas reserves and estimated future net revenues. The 2022 and 2021 changes in the standardized measure of discounted future net cash flows related to future Royalty Income from proved reserves are as follows: 2022 2021 (in thousands) Balance, January 1 $ 134,227 $ 32,644 Revisions of prior-year estimates, change in prices and other 326,027 134,975 Extensions, discoveries and other additions 2,217 968_ Accretion of discount 13,423 3,264 Royalty Income (79,009 ) 37,624 Balance, December 31 $ 396,885 $ 134,227 Reserve quantities and revenues shown in the tables above for the Royalty were estimated from projections of reserves and revenues attributable to the combined Hilcorp and Trust interests. Reserve quantities attributable to the Royalty were derived from estimates by allocating to the Royalty a portion of the total net reserve quantities of the interests, based upon gross revenue less production taxes. Because the reserve quantities attributable to the Royalty are estimated using an allocation of the reserves, any changes in prices or costs will result in changes in the estimated reserve quantities allocated to the Royalty. Therefore, the reserve quantities estimated will vary if different future price and cost assumptions occur. The future net cash flows were determined without regard to future federal income tax credits, if any, available to production from Coal Seam Wells. For 2022, $6.09 per Mcf of natural gas and $83.28 per Bbl of oil were used in determining future net revenue. These prices were based on a 12-month unweighted average of the first-day-of-the-month pricing of $6.36 per MMBtu of Henry Hub natural gas and $93.67 per Bbl of West Texas Intermediate oil. The increase in reserve quantities for 2022 is due primarily to higher natural gas prices. For 2021, $3.05 per Mcf of natural gas and $55.73 per Bbl of oil were used in determining future net revenue. These prices were based on a 12-month unweighted average of the first-day-of-the-month pricing of $3.598 per MMBtu of Henry Hub natural gas and $66.56 per Bbl of West Texas Intermediate oil. The increase in reserve quantities for 2021 is due primarily to higher natural gas prices. 22 Table of Contents 10. Quarterly Schedule of Distributable Income (Unaudited) The following is a summary of the unaudited quarterly schedule of distributable income for the two years ended December 31, 2022 and 2021 (in thousands, except per unit amounts): 2022 Royalty Income Distributable Income Distributable Income Per Unit First Quarter $ 14,890 $ 14,369 $ 0.308294 Second Quarter 13,723 13,343 0.286277 Third Quarter 21,346 21,111 0.452950 Fourth Quarter 29,050 28,776 0.617387 Total $ 79,009 $ 77,599 $ 1.664908 2021 Royalty Income Distributable Income Distributable Income Per Unit First Quarter $ 8,212 $ 7,751 $ 0.166304 Second Quarter 7,566 7,166 0.153748 Third Quarter 6,060 5,674 0.121735 Fourth Quarter 15,786 15,379 0.329957 Total $ 37,624 $ 35,970 $ 0.771744 11. Commitments and Contingencies Contingencies related to the Subject Interests that are unfavorably resolved would generally be reflected by the Trust as reductions to future Royalty Income payments to the Trust with corresponding reductions to cash distributions to Unit Holders. Covid-19 Pandemic . The Trust continues to request periodic updates from Hilcorp as to its production and financial expectations with respect to the Subject Interests due to any effects caused by the Covid-19 pandemic and the recent fluctuations in oil and gas pricing. Hilcorp informed the Trust it does not anticipate that the current state of the Covid-19 pandemic will have any material impact on its operation of the Subject Interests or on its payments of Royalty Income to the Trust and it does not have anything else to specifically to comment on regarding the Covid-19 pandemic. Geo-Political Uncertainties. Prices for goods and services have risen during 2022, and inflationary pressures have accelerated during 2022, as regional and global commodity prices have risen in response to the conflict in Ukraine. Hilcorp informed the Trust that it does not have anything specifically to comment on regarding the war in Ukraine. Gross Proceeds and Production Cost Estimates . Hilcorp’s process of reconciling actual revenue and severance taxes to previously reported estimates (which the Trust refers to as “true-ups”) were still occurring and being reported in 2021 and 2022. At the beginning of 2021, Hilcorp informed the Trust that it planned to refine further its estimating and reporting processes and that Hilcorp would review prior periods to ensure greater accuracy and consistency, both for prior periods as well as future reporting periods. As part of that review process, Hilcorpho informed the Trust that it may reverse and rebook revenue for certain periods. Thus, distributions to the Trust from Hilcorp in certain months during 2021 and 2022 were subject to adjustments based upon prior months’ true-ups and rebooking, plus interest. Hilcorp informed the Trust that it completed the transition to its new accounting system and began to report actual, not estimated, revenue and expenses for operated wells beginning with the June 2021 production month (August 2021 reporting month) and that it has reversed and rebooked revenue for certain prior periods. The true-ups of revenues for non-operated properties for the 2021 distribution periods were completed in the February and March 2022 reporting months. In 2022, Hilcorp made total actualizations and other adjustments resulting in $10,951,453 additional Royalty Income paid to the Trust. Of this amount, $1,391,619 was for prior period non-operated true-ups and revenue for granted audit exceptions and interest, and $9,559,834 was related to adjustments associated with Hilcorp process reviews and adjustments. Hilcorp has informed the Trustee that it has implemented additional controls to enhance the reporting process and reduce the need for future corrections. As of December 31, 2022, Hilcorp has informed the Trust that it believes that all prior month actualizations have occurred, and does not expect to need to report any further actualizations in future distribution reports. However, the Trustee continues to engage with Hilcorp regarding its ongoing accounting and reporting to the Trust, and the Trust’s third-party compliance auditors continue to audit payments made by Hilcorp to the Trust, inclusive of sales revenues, production costs, capital expenditures, adjustments, actualizations, and recoupments. The Trust’s auditing process has also included detailed analysis of Hilcorp’s pricing and rates charged. As previously disclosed in the Trust’s filings, these revenues and costs (along with all costs) are the subject of the Trust’s ongoing comprehensive audit process by our professional consultants and outside counsel to ensure full compliance with all the underlying operative Trust agreements and evaluating all available potential remedies in the event there is evidence of non-compliance. 23 Table of Contents 12. Subsequent Events Since January 1, 2023, the Trust has announced the following three monthly cash distributions to the holders of its Units: • On January 20, 2023, the Trust announced a cash distribution of $5,231,814.43 or $0.112250 per Unit, based primarily upon production during the month of November 2022, that was subsequently paid on February 14, 2023. • On February 17, 2023, the Trust announced a cash distribution of $11,644,396.06 or $0.249833 per Unit, based primarily upon production during the month of December 2022, that was subsequently paid on March 14, 2023. • On March 21, 2023, the Trust announced a cash distribution of $19,095,065.72 or $0.409688 per Unit, based primarily upon production during the month of January 2023, payable on April 14, 2023. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.