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San Juan Basin Royalty Trust Reports Operating Results (10-Q)

November 09, 2009 | About:
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10qk

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San Juan Basin Royalty Trust (SJT) filed Quarterly Report for the period ended 2009-09-30.

San Juan Basin Royalty is an express trust created under the laws of the state of Texas by the San Juan Basin Royalty Trust Indenture. The Trustee, Bank One, Texas, N.A. , has the primary function of collecting monthly net proceeds attributable to the Royalty and making the monthly distributions to the unit holders after deducting administrative expenses and any amounts necessary for cash reserves. San Juan Basin Royalty Trust has a market cap of $871.12 million; its shares were traded at around $18.69 with and P/S ratio of 6.03. The dividend yield of San Juan Basin Royalty Trust stocks is 6.49%. San Juan Basin Royalty Trust had an annual average earning growth of 16% over the past 10 years. GuruFocus rated San Juan Basin Royalty Trust the business predictability rank of 2.5-star.

Highlight of Business Operations:

The Trust received Royalty income of $7,232,890 and interest income of $194,481 during the third quarter of 2009. There was no change in cash reserves. After deducting administrative expenses of $435,690, distributable income for the quarter was $6,991,681 ($0.150007 per Unit). In the third quarter of 2008, Royalty income was $52,541,763, interest income was $32,508, administrative expenses were $351,221 and distributable income was $52,223,050 ($1.120455 per Unit). In August 2008, the Trust recovered $40,930 previously escheated to the State of Texas in the name of the Trust, and those funds were temporarily added to cash reserves pending further research as to the origin of the funds. Based on 46,608,796 Units outstanding, the per-Unit distributions during the third quarter of 2009 were as follows:

The capital costs attributable to the Underlying Properties for the third quarter of 2009 and deducted by BROG in calculating Royalty income were approximately $7.4 million. BROG has informed the Trust that the 2009 budget for capital expenditures for the Underlying Properties is $25.2 million. In addition, BROG estimates that during 2009 it will incur capital expenses in the amount of approximately $12.1 million attributable to the capital budgets for 2008 and prior years. Approximately 12% of the planned expenditures attributable to the 2009 budget will be on Fruitland Coal formation projects with the remainder to be spent on conventional projects. BROG reports that based on its actual capital requirements, the pace of regulatory approvals, the mix of projects and swings in the price of natural gas, the actual capital expenditures for 2009 could range from $10 million to $45 million.

BROG anticipates 431 projects in 2009 at an estimated cost of $25.2 million. Approximately $6 million of that budget is allocable to 49 new wells, including 39 wells scheduled to be dually completed in the Mesaverde and Dakota formations and four wells projected to be drilled to formations producing coal seam gas. Approximately $7.1 million will be spent on workovers and facilities projects. Of the $12.1 million attributable to the budgets for prior years, approximately $6.9 million is allocable to new wells, and the $5.2 million balance will be applied to miscellaneous capital projects such as workovers and operated facility projects. BROG also anticipates that the possible implementation of new rules minimizing surface disturbances, requiring the implementation of closed-loop systems for the disposal of drilling fluids and cuttings, and restricting the use of open reserve pits could reduce the number of projects due to increased compliance costs.

BROG has informed the Trust that lease operating expenses and property taxes were $7,756,942 and $213,289, respectively, for the third quarter of 2009, as compared to $7,947,438 and $276,732, respectively, for the third quarter of 2008. BROG reports that lease operating expenses were lower in the third quarter of 2009 compared to the third quarter of 2008 primarily because of lower contract services and maintenance costs. Furthermore, BROG reports that the decrease in costs related to the property taxes are due to the fact that property tax amounts are accrued based on the prior years actual costs. In 2009, $71,096 per month in property taxes is accrued, based on the

For the nine months ended September 30, 2009, the Trust received Royalty income of $19,257,575 and interest income of $197,892. After deducting administrative expenses of $1,706,123, distributable income was $17,749,344 ($0.380814 per Unit) for the nine months ended September 30, 2009. There was no change in cash reserves. For the nine months ended September 30, 2008, the Trust received Royalty income of $113,730,327 and interest income of $216,621. Cash reserves increased in August 2008 by $40,930, the amount recovered from the State of Texas. After deducting administrative expenses of $1,554,074, distributable income was $112,392,874 ($2.411409 per Unit) for the nine months ended September 30, 2008.

Capital expenditures incurred by BROG, attributable to the Underlying Properties, for the first nine months of 2009 amounted to approximately $28.3 million. Capital expenditures were approximately $19.9 million for the first nine months of 2008. Lease operating expenses and property taxes first nine months of 2009 totaled $24,563,067 and $703,310, respectively, as compared to $23,767,528 and $798,760, respectively, for 2008.

Read the The complete ReportSJT is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.

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