San Juan Basin Royalty Trust Announces Settlement Agreement
September 06 2023 - 8:33PM
Business Wire
PNC Bank, National Association, as the trustee (the “Trustee”)
of the San Juan Basin Royalty Trust (the “Trust”) (NYSE: SJT),
announced that an agreement between the Trustee and Hilcorp San
Juan L.P. (“Hilcorp”), the owner of the Trust’s subject interests,
will result in the payment of $1,037,093.45 to the Trust by Hilcorp
to resolve the 2017-2020 Disputed Expenses exceptions and enter
into an amendment to the Conveyance Agreement with respect to the
expenses associated with the operator’s saltwater disposal
facilities.
The Trustee routinely engages with Hilcorp regarding its ongoing
accounting and reporting to the Trust with respect to revenue and
expenses for operated wells, inclusive of sales revenues,
production costs, capital expenditures, adjustments,
actualizations, and recoupments, as well as a detailed analysis of
Hilcorp’s pricing and rates charged. 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.
In the course of the most recent audit process by the Trustee,
certain exceptions to the several different categories of expenses
(specifically offsite labor, overhead, operator-owned compressors
and saltwater disposal facilities) for the years 2017 through 2020
(the “2017-2020 Disputed Expenses”) were identified that the
Trustee believed resulted in an underpayment of royalties owed to
the Trust for those years. The Trustee engaged in extensive
discussions with Hilcorp regarding these exceptions that culminated
in Hilcorp’s agreement to pay the sum of $1,037,093.45, which
includes the accumulated interest incurred as a result of the
underpayment. Therefore, on August 30, 2023, the Trust and Hilcorp
entered into a Compromise and Settlement Agreement whereby Hilcorp
would (i) pay the sum of $1,037,093.45 to resolve the 2017-2020
Disputed Expenses that resulted in the underpayment of royalties
and (ii) enter into an amendment to the Conveyance Agreement with
respect to the expenses associated with the operator’s saltwater
disposal facilities. The settlement amount includes the interest
incurred over the time period of the underpayment. The payment is
scheduled to be made in a future distribution.
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San Juan Basin Royalty Trust PNC Bank, National Association PNC
Asset Management Group 2200 Post Oak Blvd., Floor 18 Houston, TX
77056 website: www.sjbrt.com e-mail: sjt@pnc.com
Ross Durr, RPL, Senior Vice President & Mineral Interest
Director Kaye Wilke, Investor Relations, toll-free: (866)
809-4553
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