San Juan Basin Royalty Trust (SJT) risk factors, FY2025 10-K

BUSINESS AND OPERATING RISKS

1. 01Oil and gas prices fluctuate due to a number of factors, and lower prices will reduce net proceeds to the Trust and distributions to Unit Holders
2. 02Trust reserve estimates depend on many assumptions that may prove to be inaccurate, which could cause both estimated reserves and estimated future revenues to be too high
3. 03assumptions about future commodity price adjustments, production and development costs, severance and excise taxes, and capital expenditures
4. 04Operating risks for Hilcorp and other operators of the properties underlying the Subject Interests can adversely affect Trust distributions
5. 05A bankruptcy of Hilcorp or any third-party operator could adversely affect the operation of the wells and the development of the proved undeveloped reserves and interrupt or decrease distributions to Trust Unit Holders
6. 06The Units may lose value and cash available for distribution may be reduced as a result of title deficiencies with respect to the Royalty PropertiesNew
7. 07Hilcorp or any third-party operator may abandon property underlying the Subject Interests, thereby terminating the related Royalty payable to the Trust that is attributable to the abandoned propertyNew

FINANCIAL RISKS

1. 08Mineral properties, such as the properties underlying the Subject Interests, are depleting assets and, if Hilcorp or other operators of the properties underlying the Subject Interests do not perform additional development projects, the assets may deplete faster than expected
2. 09Increased costs of production and development will result in decreased Trust distributions
3. 10War, military invasions, terrorism and continued geopolitical hostilities could adversely affect the Trust’s distributions to its Unit Holders or the market price of its Units

RISKS RELATED TO THE STRUCTURE OF THE TRUST

1. 11The Royalty can be sold and the Trust can be terminated in certain circumstances26% rewritten
2. 12None of the Trustee, the Trust nor the Unit Holders control the operation or development of the properties underlying the Subject Interests
3. 13Unit Holders have limited voting rights

RISKS RELATED TO OWNERSHIP OF THE TRUST UNITS

1. 14If the Trust cannot meet the New York Stock Exchange continued listing requirements, the NYSE may delist the Trust Units
2. 15The market price for the Trust Units may not reflect the value of the Royalty held by the Trust
3. 16The limited liability of Trust Unit Holders is uncertain
4. 17Financial information of the Trust is not prepared in accordance with GAAPNew

LEGAL, ENVIRONMENTAL, AND REGULATORY RISKS

1. 18The operators of the properties underlying the Subject Interests are subject to extensive governmental regulation
2. 19Government action, policies or regulations designed to discourage production, reduce demand for, or promote alternatives to oil and natural gas could impact the price of oil and natural gas produced on the properties underlying the Trust’s Subject Interests, directly as intended or through unintended consequences24% rewritten
3. 20Federal and state legislative and regulatory initiatives relating to hydraulic fracturing could result in Hilcorp incurring increased costs, additional operating restrictions or delays and fewer potential drilling locations

CYBERSECURITY RISKS

1. 21The Trustee may be subject to attempted cybersecurity disruptions from a variety of sources
2. 22Trust Unit Holders are required to pay U.S. federal income taxes on their share of the Trust’s income, even if they do not receive any cash distributions from the Trust
3. 23The tax treatment of an investment in Trust Units could be affected by recent and potential legislative changes, possibly on a retroactive basis20% rewritten
4. 24A portion of any gain recognized on the disposition of the Trust Units could be taxed as ordinary income
5. 25The Trust generally allocates its items of income, gain, loss and deduction between transferors and transferees of the Trust Units based upon the monthly record date. The IRS may challenge this treatment59% rewritten
6. 26determined and allocated on a daily or prorated basis, which could require adjustments to the tax returns of the affected Trust Unit Holders and result in an increase in the administrative expense of the Trust in subsequent periodsNew