8-K: San Juan Basin Royalty Trust Announces Hilcorp's 2025 Capital Expenditure Plan

Hilcorp estimates its 2025 capital expenditures for the Subject Interests to be approximately $9.0 million.

Summary

• The San Juan Basin Royalty Trust announced Hilcorp's 2025 capital expenditure plan for the Trust's subject interests.
• Hilcorp estimates capital expenditures of approximately $9.0 million for 2025.
• The 2025 plan includes 29 projects.
• Approximately $4.0 million is allocated to seven new vertical drill projects in the Dakota/Mesaverde formations.
• Around $4.5 million is budgeted for 22 recompletions and workovers in the Fruitland Coal formation.
• About $0.5 million is allocated to facilities projects related to natural gas compression and other facility projects.
• For 2024, Hilcorp projected capital expenditures of approximately $34.0 million.
• Actual capital expenditures from January 2024 through November 2024 totaled approximately $33.6 million.
• Approximately $24.6 million was spent on two new horizontal drilling projects in the Mancos formation in 2024.
• Around $8.0 million was spent on recompletions and workovers in 2024.
• Approximately $1.0 million was spent on facilities projects in 2024.

Sentiment

Score: 4

Explanation: The sentiment is slightly negative due to the significant decrease in planned capital expenditures for 2025 compared to 2024, which could indicate a less optimistic outlook for future production and revenue.

Positives

• Hilcorp is continuing to invest in the Subject Interests with a $9.0 million capital expenditure plan for 2025.
• Hilcorp nearly met its projected capital expenditures for 2024, spending $33.6 million out of a projected $34.0 million.

Negatives

• The 2025 capital expenditure plan of $9.0 million is significantly lower than the $34.0 million projected for 2024.

Risks

• Hilcorp's planned project status for 2025 is subject to revision if Hilcorp revises its assumptions underlying the 2025 Plan.
• Actual capital costs may vary from these estimates.
• The document contains forward-looking statements that are subject to risks and uncertainties, including volatility of oil and gas prices, governmental regulation, litigation, and uncertainties about estimates of reserves.

Future Outlook

Hilcorp's 2025 capital expenditure plan is subject to revision based on changes to underlying assumptions, and actual capital costs may vary from estimates.

Management Comments

• Argent Trust Company, as the trustee of the San Juan Basin Royalty Trust, announced Hilcorp's 2025 capital project plan.

Industry Context

This announcement provides insight into the investment activity in the San Juan Basin, a mature oil and gas producing region. The level of capital expenditure can be indicative of the operator's view on the remaining potential of the fields and the prevailing economic conditions.

Comparison to Industry Standards

• It is difficult to compare the capital expenditure plan to industry standards without knowing the specific details of the projects and the expected returns.
• However, the decrease in planned capital expenditure from $34.0 million in 2024 to $9.0 million in 2025 could indicate a shift in focus towards maintaining existing production rather than pursuing new growth opportunities.
• Companies like ConocoPhillips and EOG Resources, which also operate in shale basins, typically allocate capital based on expected returns and market conditions.

Stakeholder Impact

• Shareholders may be concerned about the reduced capital expenditure plan for 2025, as it could impact future royalty income.
• The reduced investment could also affect local communities that rely on the oil and gas industry for employment and economic activity.

Key Dates