What changed in this filing

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Item 1. Business

2024-04-01 compared with 2023-03-31 · 104 added, 73 removed, 57 unchanged (76% of the section changed)

2 unchanged sentences

Effective as of September 30, 2002, the original indenture was amended and restated, and, effective as of December 12, 2007,

the restated indenture was amended and restated, which we refer to as the Indenture. As a result of a series of mergers and other transactions, the current Trustee of the Trust is PNC Bank.

the restated indenture was amended and restated (such amended and restated indenture, as further amended by the First Amendment to the Amended and Restated Royalty Trust Indenture dated February 15, 2024, the Indenture).

As a result of a series of mergers and other transactions, PNC Bank, National Association (PNC Bank), served as the previous

Trustee of the Trust from October 8, 2021, through February 14, 2024.

Effective February 15, 2024, Argent Trust Company, a Tennessee chartered trust company (Argent), became the Trustee of the Trust.

The principal office

of the Trust is 3838 Oak Lawn Avenue, Suite 1720, Dallas, Texas 75219 (telephone number (866) 809-4553).

Argent Trust Company, as successor trustee of the Trust, is subject to the terms and conditions of the

The defined term Trustee as used herein shall refer to PNC Bank (which maintains its offices at 2200 Post Oak Blvd., Floor 18, Houston, TX 77056) for periods from October 8, 2021, until February 14, 2024, and shall

refer to Argent Trust Company (which maintains its offices at 3838 Oak Lawn Ave, Suite 1720, Dallas, Texas 75219) for periods on and after February 15, 2024.

Prior to October 8, 2021, other entities served as Trustee of the Trust.

Financial Statements and Supplementary Data,

For any time period prior to October 8, 2021, use of the defined term Trustee herein shall refer to the entity serving as Trustee during the applicable time period.

The Conveyance and the Royalty

23 unchanged sentences

Royalty is divided into 46,608,796 units (the Units) representing undivided fractional interests in the beneficial interest of the Trust equal to the number of shares of the common stock of Southland outstanding as of the close of

business on November 3, 1980.

Each stockholder of Southland of record at the close of business on November 3, 1980, received one freely tradable Unit for each share of the common stock of Southland then held.

Holders of Units are referred

to herein as Unit Holders.

As of December 31, 2022, 99% of the Trusts estimated proved reserves consisted of

natural gas reserves, and 91% of the Gross Proceeds from the Subject Interests in 2022 were attributable to the production and sale of natural gas by Hilcorp as well as other proceeds.

Accordingly, the market price for natural gas produced and sold

from the San Juan Basin heavily influences the amount of Trust income available for distribution to the Unit Holders by the Trust and, by extension, the price of the Units.

The market price paid for natural gas is seasonal because there is greater

demand for natural gas used for heating purposes in the winter months and more energy requirements for air conditioning in the summer months than during the rest of the year.

on November 3, 1980.

Each stockholder of Southland of record at the close of business on November 3, 1980, received one freely tradable Unit for each share of the common stock of

Southland then held.

Holders of Units are referred to herein as Unit Holders.

As of December 31, 2023, 98.4% of the

Trusts estimated proved reserves consisted of natural gas reserves, and 97.5% of the Gross Proceeds from the Subject Interests in 2023 were attributable to the production and sale of natural gas by Hilcorp as well as other proceeds.

Accordingly, the market price for natural gas produced and sold from the San Juan Basin heavily influences the amount of Trust income available for distribution to the Unit Holders by the Trust and, by extension, the price of the Units.

price paid for natural gas is seasonal because there is greater demand for natural gas used for heating purposes in the winter months and more energy requirements for air conditioning in the summer months than during the rest of the year.

The primary function of the

14 unchanged sentences

(ii) the expenses and payments of liabilities of the Trust, plus any net increase in cash reserves.

The Trustee may, in its sole discretion, establish a cash reserve for payment of Trust

liabilities that are contingent or uncertain or otherwise not currently due and payable.

The Trustee may, in its sole

discretion, establish a cash reserve for payment of Trust liabilities that are contingent or uncertain or otherwise not currently due and payable.

As of December 31, 2023, the Trustee had established cash reserves of $1.0 million.

The Trustee does not anticipate any increase or decrease to the

cash reserves in 2023.

Cash being held by the Trustee as cash reserves or pending distribution may be placed, per the Trustees

discretion, in obligations issued by (or unconditionally guaranteed by) the United States or any agency thereof, repurchase agreements secured by obligations issued by the United States or any agency thereof, certificates of deposit of banks having

capital, surplus and undivided profits in excess of $50.0 million or money market funds that have been rated at least AAm by Standard & Poors and at least Aa by Moodys, subject, in each case, to certain other qualifying

Trustee anticipates increasing the established amount of cash reserves to $2.0 million in 2024, in response to the substantial increase in capital expenditures projected by Hilcorp for 2024 and the potential that such increase materially

reduces or eliminates distributions to the Trust for a period of time.

Cash being held by the Trustee as cash reserves or pending

distribution may be placed, per the Trustees discretion, in obligations issued by (or unconditionally guaranteed by) the United States or any agency thereof, repurchase agreements secured by obligations issued by the United States or any

agency thereof, certificates of deposit of banks having capital, surplus and undivided profits in excess of $50.0 million or money market funds that have been rated at least AAm by Standard & Poors and at least Aa by

Moodys, subject, in each case, to certain other qualifying conditions.

Currently, such funds are placed in interest-bearing money market accounts.

The other powers and duties of the Trustee are

set forth in the Indenture and include the prosecution and defense of claims by and against the Trust, the engagement of consultants and professionals and the payment of Trust liabilities.

If the Trustee determines that the Trust does not have

sufficient funds to pay its liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full.

The Trustee may not sell or dispose of any part of

the assets of the Trust without the affirmative vote from the Unit Holders of 75% of all of the Units outstanding;

however, the Trustee may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any 12-month period without the consent of the Unit Holders if it determines such a sale is in the best interest of the Unit Holders.

The Trust does not operate the Subject Interests and is not empowered to carry on any

business activity.

The other powers and duties of the Trustee are set forth in the Indenture and include the prosecution and defense of claims by and against the

Trust, the engagement of consultants and professionals and the payment of Trust liabilities.

If the Trustee determines that the Trust does not have sufficient funds to pay its liabilities, the Trustee may borrow funds on behalf of the Trust, in

which case no distributions will be made to Unit Holders until such borrowings are repaid in full.

The Trustee may not sell or dispose of any part of the assets of the Trust without the affirmative vote from the Unit Holders of 75% of all of the

Units outstanding;

however, the Trustee

may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any 12-month period without the consent of the Unit Holders

if it determines such a sale is in the best interest of the Unit Holders.

The Trust does not operate the Subject Interests and is not empowered to carry on any business activity.

The Trust has no employees, officers, or directors.

All administrative functions of the Trust are performed by the Trustee.

Under the Indenture, the Trustee may act in its discretion in carrying out its powers and performing its duties and is liable only for fraud

or for acts and omissions in bad faith.

The Trustee is not liable for any act or omission of its agents or employees unless the Trustee acted in bad faith in its selection and retention of such agents or employees.

The Indenture provides that the

Trustee and its officers, agents and employees must be indemnified and receive reimbursement of expenses from the assets of the Trust for liabilities and claims incurred in the administration of the Trust, except for liabilities and claims arising

from the Trustees fraud or bad faith.

The Trust has no employees, directors, or executive officers, and thus does not have a

business need to focus on its human capital resources.

All administrative

functions of the Trust are performed by the Trustee.

Under the Indenture, the Trustee may act in its discretion in carrying out its

powers and performing its duties and is liable only for fraud or for acts and omissions in bad faith.

The Trustee is not liable for any act or omission of its agents or employees unless the Trustee acted in bad faith in its selection and retention

of such agents or employees.

The Indenture provides that the Trustee and its officers, agents and employees must be indemnified and receive reimbursement of expenses from the assets of the Trust for liabilities and claims incurred in the

administration of the Trust, except for liabilities and claims arising from the Trustees fraud or bad faith.

Because the Trust has

no employees, directors, or executive officers, it does not have a business need to focus on its human capital resources.

Successor Trustee

A Special Meeting of the Unit Holders was held on December 1, 2023 (the December Special Meeting), where Unit Holders were

asked (1) to approve the appointment of Argent Trust Company as successor trustee of the Trust, (2) to approve an amendment to the Indenture to permit a bank or trust company with capital, surplus and undivided profits (as of the end of

its last fiscal year prior to its appointment) of at least $15,000,000 to serve as successor trustee of the Trust, (3) to approve an amendment to the Indenture that would clarify the word Trustee to include former trustees of the

Trust for indemnification purposes, and (4) to approve an adjournment of the special meeting, if necessary or appropriate to permit solicitation of additional proxies in favor of the above proposals (collectively, the Proposals).

Trust issued a press release on December 1, 2023, announcing the December Special Meeting was adjourned to permit the solicitation of additional proxies in favor of proposals (1) through (4) above, as described in the Trusts

definitive proxy statement filed by the Trust with the Securities and Exchange Commission on October 2, 2023 (the Proxy Statement).

The Trust again held a special meeting of its Unit Holders on January 16, 2024 (the January Special Meeting) where the Unit

Holders of the Trust voted to approve the proposals set forth in the Trusts Proxy Statement, including the appointment of Argent Trust Company as successor trustee of the Trust, following the effective date of PNC Banks resignation.

Following approval by the Trusts Unit Holders at the January Special Meeting, the Trust entered into the First Amendment to the Amended and Restated Royalty Trust Indenture of San Juan Basin Royalty Trust to clarify the word

Trustee as used in the Indenture, would include former trustees of the Trust for indemnification purposes and to permit a bank or trust company with capital, surplus and undivided profits of at least $15,000,000 to serve as successor

trustee of the Trust.

The effective date of PNC Banks resignation as Trustee and the effective date of Argent Trust Companys appointment as successor Trustee was February 15, 2024.

Duration of the Trust

The Trust will terminate if (a) its gross revenue for each of two successive years is less than $1.0 million per year or, if earlier,

(b) the Unit Holders of at least 75% of all of the Units outstanding vote in favor of termination.

Upon termination of the Trust, the Trustee must sell the Royalty and distribute the proceeds to Unit Holders after satisfying or establishing

reserves to satisfy the liabilities of the Trust.

The Trust is not

subject to any pre-set termination provisions based on a maximum volume of natural gas or oil to be produced or the passage of time.

The Trust will terminate if (a) its gross revenue for each of two

successive years is less than $1.0 million per year or, if earlier, (b) the Unit Holders of at least 75% of all the Units outstanding vote in favor of termination.

Upon termination of the Trust, the Trustee must sell the Royalty and

distribute the proceeds to Unit Holders after satisfying or establishing reserves to satisfy the liabilities of the Trust.

The sale of San Juan Basin assets from Burlington to Hilcorp closed on July 31, 2017.

Hilcorp is the operator of the majority of the

Subject Interests, and as a result, Hilcorps actions could have a material impact on the results of operations and Hilcorp could have interests that conflict with the interests of the Trust and the Unit Holders.

The Subject Interests that are

not operated by Hilcorp are operated by other operators, some of which may be affiliated with Hilcorp.

As an operator, Hilcorp has the obligation under the Conveyance to conduct its operations in accordance with reasonable and prudent business

judgment and good oil and natural gas field practices.

The development of the Subject Interests is conducted pursuant to operating and similar agreements to which the Trust is not a party and under which the Trust has no control or other rights to

determine the location, timing and other key aspects of development and maintenance that may materially impact results of operations.

Neither the Trustee nor the Unit Holders can influence or control the operation or future development of the

Subject Interests.

Hilcorps interests may conflict with those of the Trust and the Unit Holders in situations involving the

development, maintenance, operation, or abandonment of the Subject Interests.

Hilcorp has the right to abandon any well when, in its opinion, such well ceases to produce or is not capable of producing oil and natural gas in paying quantities, even

though such well is still generating revenue for the Unit Holders.

Subject Interests, and as a result, Hilcorps actions could have a material impact

on the results of operations and Hilcorp could have interests that conflict with the interests of the Trust and the Unit Holders.

The Subject Interests that are not operated by Hilcorp are

operated by other operators, some of which may be affiliated with Hilcorp.

As an operator, Hilcorp has the obligation under the Conveyance to conduct its operations in accordance with reasonable and prudent business judgment and good oil and natural

gas field practices.

The development of the Subject Interests is conducted pursuant to operating and similar agreements to which the Trust is not a party and under which the Trust has no control or other rights to determine the location, timing and

other key aspects of development and maintenance that may materially impact results of operations.

Neither the Trustee nor the Unit Holders can influence or control the operation or future development of the Subject Interests.

Hilcorps interests may conflict with those of the Trust and the Unit Holders in situations involving the development, maintenance,

operation, or abandonment of the Subject Interests.

Hilcorp has the right to abandon any well when, in its opinion, such well ceases to produce or is not capable of producing oil and natural gas in paying quantities, even though such well is still

generating revenue for the Unit Holders.

Hilcorp reserves the right to not participate in operations on the Subject Interests when it has a right to do so under the applicable operating or similar agreement.

make decisions with respect to expenditures and decisions to allocate resources to projects in other areas that adversely affect the Subject Interests, including reducing expenditures on these properties, which could cause oil and natural gas

production to decline at a faster rate and thereby result in lower cash distributions by the Trust in the future.

In addition, Hilcorp is not obligated to the Trust to maintain any particular types or amounts of insurance, and insurance may not be

commercially available at adequate levels to cover its operational hazards at all times during the life of the Trust.

Hilcorp may make decisions with respect

to expenditures and decisions to allocate resources to projects in other areas that adversely affect the Subject Interests, including reducing expenditures on these properties, which could cause oil and natural gas production to decline at a faster

rate and thereby result in lower cash distributions by the Trust in the future.

In addition, Hilcorp is not obligated to the Trust to maintain any particular types or amounts of insurance, and insurance may not be commercially available at adequate

levels to cover its operational hazards at all times during the life of the Trust.

If a well is damaged, Hilcorp would have no obligation to drill a replacement well or otherwise compensate the Trust for the loss.

The Trust does not have insurance or indemnification to protect against losses or delays in receiving proceeds from such events.

Hilcorp is responsible, subject to the terms of an agreement with the Trust, for marketing

the production from such properties, either under existing sales contracts or under future arrangements, at the best prices and on the best terms it shall deem reasonably obtainable in the circumstances.

Additionally, Hilcorp is obligated under the

Conveyance to maintain books and records sufficient to determine the amounts payable to the Trustee.

The Trust does not have insurance

or indemnification to protect against losses or delays in receiving proceeds from such events.

Hilcorp is responsible, subject to the

terms of an agreement with the Trust, for marketing the production from such properties, either under existing sales contracts or under future arrangements, at the best prices and on the best terms it shall deem reasonably obtainable in the

circumstances.

Additionally, Hilcorp is obligated under the Conveyance to maintain books and records sufficient to determine the amounts payable to the Trustee.

Additional Information

The principal office of the Trust is located at 2200 Post Oak Blvd., Floor 18, Houston, Texas 77056 (toll-free telephone number 866-809-4553).

The Trust makes available (free of charge) its annual, quarterly, and current reports (and any amendments thereto) filed with the SEC through its website at

www.sjbrt.com as soon as reasonably practicable after electronically filing or furnishing such material with or to the SEC.

The principal

office of the Trust is located at 3838 Oak Lawn Avenue, Suite 1720, Dallas, TX 75219 (toll-free telephone numbers 866-809-4553 and 855-588-7839).

The Trust makes available (free of charge) its annual, quarterly, and current reports (and any amendments thereto) filed with the SEC through its website at www.sjbrt.com as soon as

reasonably practicable after electronically filing or furnishing such material with or to the SEC.

The Trusts materials filed with the SEC are available at the SECs internet site, www.sec.gov .

site contains reports and, as applicable, proxy and information statements, and other information regarding the Trust and other issuers that file electronically with the SEC.

This site contains reports and, as

applicable, proxy and information statements, and other information regarding the Trust and other issuers that file electronically with the SEC.

The Trust is a widely held fixed investment trust (WHFIT) classified as a non-mortgage

widely held fixed investment trust (NMWHFIT) for federal income tax purposes.

The Trustee, 2200 Post Oak Blvd., Floor 18, Houston, Texas 77056 (toll-free telephone number

866-809-4553, email address:

sjt@pnc.com ), is the representative of the Trust that will provide tax information in accordance with the applicable U.S.

Regulations governing the information reporting requirements of the Trust as a WHFIT and a NMWHFIT.

The tax information is generally posted by the Trustee on the Trusts website:

The Trustee, 3838 Oak Lawn Avenue, Suite 1720, Dallas, TX 75219 (toll-free telephone number

866-809-4553 and 855-588-7839, email address:

royaltytrustgroup@argenttrust.com), 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 tax information is generally posted

by the Trustee on the Trusts website:

www.sjbrt.com .

Not required.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business