Item 9A. Controls and Procedures
ITEM 9A.
CONTROLS AND PROCEDURES
The Trust maintains a system of internal disclosure controls and procedures that is designed to ensure that the information required to be
disclosed in the Trusts filings under the Exchange Act is recorded, processed, summarized, and reported within the times specified in the SECs rules and forms. In its evaluation of its disclosure controls and procedures, the Trustee has
relied, to the extent considered reasonable, on information provided by Hilcorp, the owner of the properties. Consequently, the Trusts ability to timely and accurately disclose relevant information in its periodic reports is dependent upon
Hilcorps timely delivery of accurate oil and gas revenue and production cost information and, therefore, the Royalty Income owed to the Trust.
The Conveyance that transferred the royalty to the Trust obligates Hilcorp to provide the Trust with certain financial and operational
information, including information concerning calculations of Royalty Income owed to the Trust. Once the Trust receives the financial information from Hilcorp, the Trust engages independent public accountants, compliance auditors, attorneys and
petroleum engineers in order to assist the Trustee to ensure the accuracy and completeness of the information required to be disclosed in the Trusts periodic reports. These outside professionals advise the Trustee in its review and compilation
of this information for inclusion in this Annual Report on Form 10-K and the other periodic reports provided by the Trust to the SEC.
During 2022, various adjustments were made for 2021 and 2022 production periods as a result of Hilcorps process review of the new
accounting system. Hilcorp has informed the Trustee that it has implemented additional controls to enhance the reporting process and reduce the need for future corrections. Hilcorp has indicated that it will coordinate with the Trustee on the timing
of any further adjustments and will communicate that timing to investors.
The Trustee continues to engage with Hilcorp regarding its
ongoing accounting and reporting to the Trust, and the Trusts 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 Trusts auditing process has also included detailed analysis of Hilcorps pricing and rates charged. As previously disclosed in the Trusts filings, these revenues and costs (along with all costs)
are the subject of the Trusts ongoing comprehensive audit process by the Trusts 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.
The Trustee has
evaluated the Trusts internal disclosure controls and procedures as of December 31, 2023, and has concluded that such disclosure controls and procedures are effective, at the reasonable assurance level (as such term is used in
Rule 13a-15(f) of the Exchange Act), to ensure that material information received from Hilcorp is gathered on a timely basis to be included in the Trusts periodic reports and recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms.
Additionally, during the quarter ended
December 31, 2023, there were no changes to the Trusts internal controls over financial reporting (as such term is used in Rule 13a-15(f) of the Exchange Act) that materially affected, or are
reasonably likely to materially affect, the Trusts internal control over financial reporting. Because the Trust does not have, nor does the Indenture provide for, officers, a board of directors or an independent audit committee, the Trustee
has reviewed neither the Trusts disclosure controls and procedures nor the Trusts internal control over financial reporting in concert with management, a board of directors or an independent audit committee.
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Trustees Report on Internal Control over Financial Reporting
The Trustee is responsible for establishing and maintaining adequate internal control over financial reporting. The Trusts internal
control over financial reporting is a process designed under the supervision of the Trustee to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Trusts financial statements for external
purposes in accordance with a modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles.
As of December 31, 2023, the Trustee assessed the effectiveness of the Trusts internal control over financial reporting based on
the criteria for effective internal control over financial reporting established in Internal Control Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework).
Based on the assessment, the Trustee determined that the Trust maintained effective internal control over financial reporting as of December 31, 2023, based on those criteria.
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ITEM 9B.
OTHER INFORMATION
(a)
None.
(b)
The Trust does not have any directors or officers, and as a result, no such person adopted or terminated a
Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item
408(a) of Regulation S-K, during the most recent fiscal quarter. Because the Trust does not have officers, directors, or employees, it has not adopted insider trading policies and procedures governing the
purchase, sale, or other disposition of Trust securities by such persons.
ITEM 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
PART III
ITEM 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Trust is managed by a corporate trustee and has no directors, executive officers, or employees. Accordingly, the Trust does not have an
audit committee, audit committee financial expert, nominating committee or a code of ethics applicable to executive officers. The Trustee has adopted a policy regarding standards of conduct and conflicts of interest applicable to all directors,
officers, and employees of the Trustee. The Trustee is a corporate trustee that may be removed, with or without cause, at a meeting of the Unit Holders, by the affirmative vote of the holders of a majority of all the Units then outstanding.
Delinquent Section 16(a) Reports
The Trust has no directors or officers. Accordingly, only holders of more than 10% of the Trusts Units are required to file with the SEC
initial reports of ownership of Units and reports of changes in such ownership. Based solely on a review of these reports, the Trust believes that the applicable reporting requirements of Section 16(a) of the Exchange Act were complied with for
all transactions that occurred in 2023.
ITEM 11.
EXECUTIVE COMPENSATION
The Trust has no directors, executive officers or employees to whom it pays compensation. The Trust is administered by employees of the Trustee
in the ordinary course of their employment who receive no compensation specifically related to their services to the Trust. Accordingly, the Trust does not have a compensation committee or maintain any equity compensation plans, and there are no
Units reserved for issuance under any such plans.
Under the Indenture, the Trustee is entitled to an administrative fee for its
administrative services and the preparation of quarterly and annual statements, computed as (i) 1/20 of 1% of the first $100.0 million of the annual gross revenue of the Trust, and 1/30 of 1% of the annual gross revenue of the Trust in excess
of $100 million and (ii) the Trustees standard hourly rates for time in excess of 300 hours annually. The minimum administrative fee due under items (i) and (ii) is $36,000 per year. Administrative fees paid to the Trustee
were $120,108 and $90,815 for the years ended December 31, 2023 and 2022, respectively.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY HOLDER
MATTERS
The Trust has no directors, executive officers, or employees. Accordingly, the Trust does not
maintain any equity compensation plans and there are no Units reserved for issuance under any such plans.
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Security Ownership of Certain Beneficial Owners
None.
Security Ownership of Trustee
Argent Trust Company, the Trustee, held as of February 26, 2024, an aggregate of 37,801 Units in various fiduciary capacities, and it had
shared voting and investment power with respect to all such Units.
Changes in Control
The Trustee knows of no arrangement, including any pledge by any person of Units of the Trust, the operation of which may at a subsequent date
result in a change of control of the Trust.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Trust has no directors or executive officers; therefore, no determination has been made relative to director
independence. See Item 11 for the remuneration received by the Trustee during the year ended December 31, 2023, and Item 12 for information concerning Units owned by the Trustee.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table presents fees for professional audit services rendered by Weaver and Tidwell, L.L.P., the Trusts principal
accountants, for the audit of the Trusts annual financial statements for the fiscal years ended December 31, 2023 and 2022 and fees billed for other services rendered to the Trust by Weaver and Tidwell, L.L.P. during those periods.
2023
2022
Audit Fees
$
78,486
$
73,712
Audit-Related Fees
0
0
Tax Fees
0
0
All Other Fees
0
0
Total
$
78,486
$
73,712
Audit Fees consist of fees billed for professional services rendered for the audit of the Trusts annual
financial statements, review of the interim financial statements included in the Trusts quarterly reports and services that are normally provided by Weaver and Tidwell, L.L.P. in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit
or review of the Trusts financial statements. This category includes fees related to audit and attest services not required by statute or regulations and consultations concerning financial accounting and reporting standards.
Tax Fees consist of fees for professional services billed for tax compliance, tax advice and tax planning. These services include assistance
regarding federal and state tax compliance.
All Other Fees consist of fees billed for products and services other than the services
reported above.
The Trust has no directors or executive officers. Accordingly, the Trust does not have an audit committee, and there are
no audit committee pre-approval policies or procedures relating to services provided by the Trusts independent accountants. Pursuant to the terms of the Indenture, the Trustee engages and approves all
services rendered by the Trusts independent accountants.
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PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following documents are filed as a part of this Annual Report on Form 10-K:
Financial Statements
Included in Part II
of this Annual Report on Form 10-K:
Report of Independent Registered Public
Accounting Firm
Statements of Assets, Liabilities and Trust Corpus
Statements of Distributable Income
Statements of Changes in Trust Corpus
Notes to Financial Statements
Financial Statement Schedules
Financial
statement schedules are omitted because of the absence of conditions under which they are required or because the required information is given in the financial statements or notes thereto.
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Exhibits
Exhibit
Number
Description
4(a)
San Juan Basin Amended and Restated Royalty Trust Indenture, dated December
12, 2007, filed as Exhibit 99.2 to the Trusts Current Report on Form 8-K filed with the SEC on December 14, 2007, and incorporated herein by reference*
4(b)
Net Overriding Royalty Conveyance from Southland Royalty Company to The Fort Worth National Bank, as Trustee, dated November
3, 1980 (without Schedules), filed as Exhibit 4(b) to the Trusts Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2006, incorporated herein by reference*
4(c)
Assignment of Net Overriding Interest (San Juan Basin Royalty Trust), dated September
30, 2002, between Bank One, N.A. and TexasBank, filed as Exhibit 4(c) to the Trusts Quarterly Report on Form 10-Q filed with the SEC for the quarter ended September
30, 2002, incorporated herein by reference*
4(d)
Description of San Juan Basin Royalty Trusts Securities, filed as Exhibit 4(d) to the Trusts Annual Report on Form 10-K file with the SEC for the year ended December 31, 2019, incorporated herein by reference*
4(e)
First Amendment to the San Juan Basin Amended and Restated Royalty Trust Indenture, dated February
15, 2024, filed as Exhibit 4(f) to the Trusts Current Report on Form 8-K filed with the SEC on February 15, 2024, and incorporated herein by reference*
10
Indemnification Agreement, dated May 13, 2003, with effectiveness as of July
30, 2002, by and between Lee Ann Anderson and San Juan Basin Royalty Trust, heretofore filed as Exhibit 10(a) to the Trusts Quarterly Report on Form 10-Q filed with the SEC for the quarter ended March 31,
2003, is incorporated herein by reference*
23
Consent of Cawley, Gillespie & Associates, Inc., reservoir engineer**
31
Certification required by Rule 13a-14(a), dated April
1, 2024, by Nancy Willis, Director of Royalty Trust Services of Argent Trust Company, the Trustee of the Trust**
32
Certification required by Rule 13a-14(b), dated April
1, 2024, by Nancy Willis, Director of Royalty Trust Services of Argent Trust Company, the Trustee of the Trust**
97
Executive Officer Compensation Recovery Policy**
99.1
Independent Petroleum Engineers Report prepared by Cawley, Gillespie & Associates, Inc., dated March 11, 2024**
*
A copy of this Exhibit is available to any Unit Holder (free of charge) upon written request to the Trustee,
Argent Trust Company, 3838 Oak Lawn Ave., Suite 1720, Dallas, Texas 75219.
**
Filed herewith.
***
Furnished herewith.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ARGENT TRUST COMPANY, AS TRUSTEE OF THE SAN JUAN BASIN ROYALTY TRUST
By:
/s/ Nancy Willis
Name:
Nancy Willis
Title:
Director of Royalty Trust Services
Date: April 1, 2024
(The Trust has no directors or executive officers)
47