<PAGE>   1
 
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                             ---------------------
 
                                   FORM 10-K
 
(MARK ONE)
 
[X]           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998,
 
                                       OR
 
[ ]         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM           TO
 
                         COMMISSION FILE NUMBER 1-8032
 
                          SAN JUAN BASIN ROYALTY TRUST
                 (Exact name of registrant as specified in the
                    San Juan Basin Royalty Trust Indenture)
 
<TABLE>
<S>                                            <C>
                    TEXAS                                       75-6279898
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                     Identification Number)
            BANK ONE, TEXAS, N.A.                                  76113
         CORPORATE TRUST DEPARTMENT                             (Zip Code)
                P.O. BOX 2604
              FORT WORTH, TEXAS
  (Address of principal executive officers)
</TABLE>
 
                                 (817) 884-4630
              (Registrant's telephone number, including area code)
          Securities registered pursuant to Section 12(b) of the Act:
 
<TABLE>
<CAPTION>
                                                         NAME OF EACH EXCHANGE ON
             TITLE OF EACH CLASS                             WHICH REGISTERED
             -------------------                         ------------------------
<S>                                            <C>
        Units of Beneficial Interest                      New York Stock Exchange
</TABLE>
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                                      NONE
                                (Title of Class)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]
 
     At March 24, 1999, there were 46,608,796 Units of Beneficial Interest of
the Trust outstanding with an aggregate market value on that date of
$308,783,274.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     "Units of Beneficial Interest" at page 1; "Description of the Properties"
at pages 5 and 6; "Trustee's Discussion and Analysis" at pages 7 and 8; "Results
of the 4th Quarters of 1998 and 1997" at page 9; and "Statements of Assets,
Liabilities and Trust Corpus," "Statements of Distributable Income," "Statements
of Change in Trust Corpus," "Notes to Financial Statements," and "Independent
Auditor's Report" at page 10 et seq., in registrant's Annual Report to Unit
holders for fiscal year ended December 31, 1998 are incorporated herein by
reference for Item 2 (Properties), Item 3 (Legal Proceedings), Item 5 (Market
for Units of the Trust and Related Security Holder Matters), Item 7
(Management's Discussion and Analysis of Financial Condition and Results of
Operation) and Item 8 (Financial Statements and Supplementary Data) of Part II
of this Report.
 
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<PAGE>   2
 
                                     PART I
 
ITEM 1. BUSINESS
 
     The San Juan Basin Royalty Trust (the "Trust") is an express trust created
under the laws of the state of Texas by the "San Juan Basin Royalty Trust
Indenture" (the "Trust Indenture") entered into on November 3, 1980, between
Southland Royalty Company ("Southland Royalty") and The Fort Worth National
Bank, a banking association organized under the laws of the United States, as
Trustee. The Trustee is now Bank One, Texas, N.A. The principal office of the
Trust (sometimes referred to herein as the "Registrant") is located at 500
Throckmorton Street, Fort Worth, Texas 76102, Attention: Corporate Trust
Department (telephone number 817/884-4630).
 
     On October 23, 1980, the stockholders of Southland Royalty approved and
authorized that company's conveyance of a net overriding royalty interest
(equivalent to a net profits interest) to the Trust for the benefit of the
stockholders of Southland Royalty of record at the close of business on the date
of the conveyance consisting of a 75% net overriding royalty interest carved out
of that company's oil and gas leasehold and royalty interests in the San Juan
Basin of northwestern New Mexico. The conveyance of this interest (the
"Royalty") was made on November 3, 1980, effective as to production from and
after November 1, 1980 at 7:00 A.M.
 
     The Royalty was carved out of and now burdens those properties and
interests as more particularly described under "Item 2. Properties" herein.
 
     The Royalty constitutes the principal asset of the Trust and the beneficial
interests in the Royalty are divided into that number of Units of Beneficial
Interest (the "Units") of the Trust equal to the number of shares of the common
stock of Southland Royalty outstanding as of the close of business on November
3, 1980. Each stockholder of Southland Royalty of record at the close of
business on November 3, 1980, received one Unit for each share of the common
stock of Southland Royalty then held.
 
     The function of the Trustee is to collect the income attributable to the
Royalty, to pay all expenses and charges of the Trust, and then distribute the
remaining available income to the Unit holders. The Trust is not empowered to
carry on any business activity and has no employees, all administrative
functions being performed by the Trustee.
 
     In 1985, Southland Royalty became a wholly-owned subsidiary of Burlington
Northern Inc. ("BNI"). In 1988, BNI transferred its natural resource operations
to Burlington Resources Inc. ("BRI") as a result of which Southland Royalty
became a wholly-owned indirect subsidiary of BRI. As a result of these
transactions, El Paso Natural Gas Company ("El Paso"), Meridian Oil, Inc.
("MOI") and Meridian Oil Trading Inc. ("MOTI") also became indirect subsidiaries
of BRI. Effective January 1, 1996, Southland Royalty, a wholly-owned subsidiary
of MOI, was merged with and into MOI, by which action the separate corporate
existence of Southland Royalty ceased and MOI survived and succeeded to the
ownership of all of the assets, has the rights, powers and privileges and
assumed all of the liabilities and obligations of Southland Royalty. Subsequent
to the merger, MOI changed its name to Burlington Resources Oil & Gas Company
("BROG").
 
     The term "net proceeds" as used in the November 3, 1980 conveyance means
the excess of "gross proceeds" received by BROG during a particular period over
"production costs" for such period. "Gross proceeds" means the amount received
by BROG (or any subsequent owner of the interests from which the Royalty was
carved) from the sale of the production attributable to the interests from which
the Royalty was carved (the "Underlying Properties"), subject to certain
adjustments. "Production costs" generally means costs incurred on an accrual
basis by BROG in operating its properties and interests out of which the Royalty
was carved, including both capital and non-capital costs. For example, these
costs include development drilling, production and processing costs, applicable
taxes, and operating charges. If production costs exceed gross proceeds in any
month, the excess is recovered out of future gross proceeds prior to the making
of further payment to the Trust, but the Trust is not otherwise liable for any
production costs or other costs or liabilities attributable to these properties
and interests or the minerals produced therefrom. If at any time the Trust
receives more than the amount due under the Royalty, it shall not be obligated
to return such overpayment,
 
                                        1
<PAGE>   3
 
but the amounts payable to it for any subsequent period shall be reduced by such
amount, plus interest, at a rate specified in the conveyance.
 
     Certain of the Underlying Properties are operated by BROG with the
obligation to conduct its operations in accordance with reasonable and prudent
business judgment and good oil and gas field practices. As operator, BROG has
the right to abandon any well when in its opinion such well ceases to produce or
is not capable of producing oil and gas in paying quantities. BROG also is
responsible, to the extent it has the legal right to do so for marketing the
production from such properties, either under existing sales contracts or under
future arrangements at the best prices and on the best terms it shall deem
reasonably obtainable in the circumstances. As a result of the settlement of the
Litigation (as hereinafter defined), agreement was reached, among other things,
regarding the marketing of such production. See Note 5 of Notes to Financial
Statements incorporated herein by reference. BROG also has the obligation to
maintain books and records sufficient to determine the amounts payable to the
Trustee. BROG, however, can sell its interest in the Underlying Properties.
 
     Proceeds from production in the first month are generally recovered by BROG
in the second month, the net proceeds attributable to the Royalty are paid by
BROG to the Trustee in the third month and distribution by the Trustee to the
Unit holders is made in the fourth month. The identity of Unit holders entitled
to a distribution will generally be determined as of the last business day of
each calendar month (the "monthly record date"). The amount of each monthly
distribution will generally be determined and announced ten days before the
monthly record date. Unit holders of record as of the monthly record date will
be entitled to receive the calculated monthly distribution amount for each month
on or before ten business days after the monthly record date. The aggregate
monthly distribution amount is the excess of (i) net revenues from the Trust
properties, plus any decrease in cash reserves previously established for
contingent liabilities and any other cash receipts of the Trust over (ii) the
expenses and payments of liabilities of the Trust plus any net increase in cash
reserves for contingent liabilities.
 
     Cash being held by the Trustee as a reserve for liabilities or
contingencies (which reserves may be established by the Trustee in its
discretion) or pending distribution is placed, in the Trustee's discretion, in
obligations issued by (or unconditionally guaranteed by) the United States or
any agency thereof, repurchase agreements secured by obligations issued by the
United States or any agency thereof, or certificates of deposit of banks having
a capital, surplus and undivided profits in excess of $50,000,000, subject, in
each case, to certain other qualifying conditions.
 
     The Underlying Properties are primarily gas producing properties. Normally
there is a greater demand for gas in the winter months than during the rest of
the year. Otherwise, the income to the Trust attributable to the Royalty is not
subject to seasonal factors nor in any manner related to or dependent upon
patents, licenses, franchises or concessions. The Trust conducts no research
activities.
 
ITEM 2. PROPERTIES
 
     The 75% net overriding royalty conveyed to the Trust was carved out of
Southland Royalty's (now BROG's) working interest and royalty interests in the
San Juan Basin in northwestern New Mexico. References below to "gross" wells and
acres are to the interests of all persons owning interests therein, while
references to "net" are to the interests of BROG (from which the Royalty was
carved) in such wells and acres.
 
     Unless otherwise indicated, the following information in Item 2 is based
upon data and information furnished to the Trustee by BROG.
 
PRODUCING ACREAGE, WELLS AND DRILLING
 
     The Underlying Properties consist of working interests and royalty
interests in 151,900 gross (119,000 net) producing acres in San Juan, Rio Arriba
and Sandoval Counties of northwestern New Mexico. Based upon information
received from the Trust's independent petroleum engineers, the Trust properties
contain 2,951 gross (812 net) economic wells, including dual completions.
Production from conventional gas wells is
 
                                        2
<PAGE>   4
 
primarily from the Pictured Cliffs, Mesaverde and Dakota formations. During
1988, Southland Royalty began development of coal seam reserves in the Fruitland
Coal formation. For additional information concerning coal seam gas, the
"Description of the Properties" section of the Trust's Annual Report to security
holders for the year ended December 31, 1998, is herein incorporated by
reference.
 
     The Royalty conveyed to the Trust is limited to the base of the Dakota
formation, which is currently the deepest significant producing formation under
acreage affected by the Royalty. Rights to production, if any, from deeper
formations are retained by BROG.
 
     During 1998, BROG incurred approximately $12.8 million of capital
expenditures for the drilling and completion of 36 gross (11.89 net)
conventional wells, recompletion of 25 gross (13.8 net) conventional wells, two
gross (.08 net) coal seam well recompletions, and 37 gross (2.28 net) coal seam
recavitations. There were 17 (1.46 net) new conventional wells, one gross (.05
net) coal seam recompletion, and three (.12 net) coal seam recavitations in
progress as of December 31, 1998.
 
     During 1997, BROG incurred approximately $7.2 million of capital
expenditures for the drilling and completion of 64 gross (3.53 net) conventional
wells, recompletion of 14 gross (5.4 net) conventional wells, drilling and
completion of 1 gross (.84 net) coal seam well, and 21 gross (2.32 net) coal
seam recavitations. There were 5 (1.22 net) new conventional wells, 3 (1.08 net)
conventional recompletions, 11 gross (.42 net) coal seam recompletions, 5 (.20
net) coal seam recavitations, and 1 (.04 net) coal seam well in progress as of
December 31, 1997.
 
     BROG announced that the New Mexico Oil Conservation Division has approved
plans for 80-acre infill drilling of the Mesaverde formation in the San Juan
Basin. The Mesaverde formation was originally developed in the 1950's on
320-acre spacing, with infill drilling initiated in the early 1970's on 160-acre
spacing. In 1994, BROG undertook an extensive study of the Mesaverde formation.
Results indicated that downspaced drilling (infill drilling) on 80-acre spacing
could significantly increase recoverable gas reserves in this massive reservoir.
A pilot program began in 1997 and was expanded in 1998 to include two additional
areas.
 
OIL AND GAS PRODUCTION
 
     The Trust recognizes production during the month in which the related
distribution is received. Production of oil and gas and related average sales
prices attributable to the Royalty for the three years ended December 31, 1998
were as follows:
 
<TABLE>
<CAPTION>
                                   1998                    1997                    1996
                           ---------------------   ---------------------   ---------------------
                             OIL         GAS         OIL         GAS         OIL         GAS
                           (BBLS)       (MCF)      (BBLS)       (MCF)      (BBLS)       (MCF)
                           -------   -----------   -------   -----------   -------   -----------
<S>                        <C>       <C>           <C>       <C>           <C>       <C>
Production..............    37,067    18,904,906    50,860    24,236,419    36,792    17,927,785
Average Price...........   $ 13.55   $      1.75   $ 19.35   $      2.21   $ 19.64   $      1.30
</TABLE>
 
PRICING INFORMATION
 
     Gas produced in the San Juan Basin is sold in both interstate and
intrastate commerce. Reference is made to "Regulation" for information as to
federal regulation of prices of oil and natural gas. Gas production from the
properties from which the Royalty was carved totaled 41,507,353 Mcf during 1998.
 
     On September 4, 1996, the Trustee announced the settlement of the
litigation (the "Litigation") filed by the Trustee against BROG and Southland
Royalty Company. The Litigation, which was filed in the state district court of
Santa Fe County, New Mexico, Cause No. SF 94-1982(c), was dismissed on September
12, 1996.
 
                                        3
<PAGE>   5
 
     Agreement was reached, among other things, regarding marketing arrangements
for the sale of those gas, oil and natural gas liquids products which are
subject to the Royalty (the "Trust" gas, oil and/or natural gas liquids) as
follows:
 
          (i) BROG's pre-existing contract with a third-party purchaser covering
     baseload gas volumes in the firm amount of 45,000 MMBtus/day was to remain
     effective for a period of one year from July 1, 1996. The remaining volumes
     of Trust gas were marketed by an independent marketer, El Paso Energy
     Marketing Company ("El Paso"), a subsidiary of El Paso Energy Corporation,
     beginning October 1, 1996. BROG agreed that subsequent contracts for the
     sale of Trust gas would require the written approval of an independent gas
     marketing consultant acceptable to the Trust;
 
          (ii) BROG will continue to market the Trust oil and natural gas
     liquids but will make payments to the Trust based on actual proceeds from
     such sales. BROG will no longer use posted prices as the basis for
     calculating proceeds to the Trust nor make a deduction for marketing fees
     associated with sales of oil or natural gas liquids products; and
 
          (iii) The independent marketer of the Trust gas is entitled to access
     to BROG's current gas transportation, gathering, processing and treating
     agreements with third parties through the remainder or their primary terms.
     Additionally, El Paso could utilize BROG's eastern transportation agreement
     for delivery from the San Juan Basin on the El Paso Natural Gas Company
     pipeline to pipelines in West Texas of up to 13,333 MMBtu's/day of gas
     produced from Trust properties for a period of one year commencing October
     1, 1996.
 
     The gas purchase contracts described in subparagraph (i), above, were
continued, by agreement of the parties until December 31, 1997. Effective
January 1, 1998, all volumes of Trust gas became subject to the terms of a
Natural Gas Sales and Purchase Contract between BROG and El Paso. That contract
is for a term of two years through and including December 31, 1999 and provides
for the sale of Trust gas at prices which will fluctuate in accordance with
published indices for gas sold in the San Juan Basin of New Mexico. BROG entered
into the contract with El Paso after soliciting and receiving competitive bids
in late 1997 from six major gas marketing firms to market and/or purchase the
Trust gas. While it is impossible to predict the exact economic value of gas
contracts, the Trust has been advised by its independent gas marketing
consultant that the contract with El Paso should provide for the average highest
sales price for natural gas in the San Juan Basin over the two-year term of the
contract. The gas marketing consultant currently advising the Trust is in
communication with BROG concerning BROG's plans for the marketing of gas subject
to the Royalty following the expiration of the contract with El Paso at the end
of 1999.
 
     See Note 5 of Notes to Financial Statements of the Trust's Annual Report to
securityholders for the year ended December 31, 1998 for further discussion of
this settlement and its impact on the Trust.
 
OIL AND GAS RESERVES
 
     The following are definitions adopted by the Securities and Exchange
Commission ("SEC") and the Financial Accounting Standards Board which are
applicable to terms used within this Item:
 
          "Proved reserves" are those estimated quantities of crude oil, natural
     gas and natural gas liquids, which, upon analysis of geological and
     engineering data, appear with reasonable certainty to be recoverable in the
     future from known oil and gas reservoirs under existing economic and
     operating conditions.
 
          "Proved developed reserves" are those proved reserves which can be
     expected to be recovered through existing wells with existing equipment and
     operating methods.
 
          "Proved undeveloped reserves" are those proved reserves which are
     expected to be recovered from new wells on undrilled acreage, or from
     existing wells where a relatively major expenditure is required.
 
          "Estimated future net revenues" are computed by applying current
     prices of oil and gas (with consideration of price changes only to the
     extent provided by contractual arrangements and allowed by federal
     regulation) to estimated future production of proved oil and gas reserves
     as of the date of the
 
                                        4
<PAGE>   6
 
     latest balance sheet presented, less estimated future expenditures (based
     on current costs) to be incurred in developing and producing the proved
     reserves, and assuming continuation of existing economic conditions.
     "Estimated future net revenues" are sometimes referred to herein as
     "estimated future net cash flows."
 
          "Present value of estimated future net revenues" is computed using the
     estimated future net revenues and a discount rate of 10%.
 
The independent petroleum engineers' reports as to the proved oil and gas
reserves as of December 31, 1996, 1997 and 1998 were prepared by Cawley,
Gillespie & Associates, Inc. The following table presents a reconciliation of
proved reserve quantities attributable to the Royalty from December 31, 1995 to
December 31, 1998 (in thousands):
 
<TABLE>
<CAPTION>
                                                              CRUDE    NATURAL
                                                               OIL       GAS
                                                              (BBLS)    (MCF)
                                                              ------   -------
<S>                                                           <C>      <C>
Reserves as of December 31, 1995............................    418    166,450
Revisions of previous estimates.............................    272     95,106
Extensions, discoveries and other additions.................      4      2,367
Production..................................................    (37)   (17,928)
                                                               ----    -------
Reserves as of December 31, 1996............................    657    245,995
                                                               ----    -------
Revisions of previous estimates.............................    (81)   (25,734)
Extensions, discoveries and other additions.................     34      7,314
Production..................................................    (51)   (24,236)
                                                               ----    -------
Reserves as of December 31, 1997............................    559    203,339
                                                               ----    -------
Revisions of previous estimates.............................   (195)   (26,204)
Extensions, discoveries and other additions.................      6      5,201
Production..................................................    (37)   (18,905)
                                                               ----    -------
Reserves as of December 31, 1998............................    333    163,431
                                                               ====    =======
</TABLE>
 
Estimated quantities of proved developed reserves of crude oil and natural gas
as of December 31, 1998, 1997 and 1996 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                              CRUDE    NATURAL
                                                               OIL       GAS
                                                              (BBLS)    (MCF)
                                                              ------   -------
<S>                                                           <C>      <C>
1998........................................................   328     159,454
1997........................................................   547     199,753
1996........................................................   637     239,962
</TABLE>
 
     Generally, the calculation of oil and gas reserves takes into account a
comparison of the value of the oil or gas to the cost of producing those
minerals, in an attempt to cause minerals in the ground to be included in
reserve estimates only to the extent that the anticipated costs of production
will be exceeded by the anticipated sales revenue. Accordingly, an increase in
sales price and/or a decrease in production cost can itself result in an
increase in estimated reserves and declining prices and/or increasing costs can
result in reserves reported at less than the physical volumes actually thought
to exist. The Financial Accounting Standards Board requires supplemental
disclosures for oil and gas producers based on a standardized measure of
discounted future net cash flows relating to proved oil and gas reserve
quantities. Under this disclosure, future cash inflows are estimated by applying
year-end prices of oil and gas relating to the enterprise's proved reserves to
the year-end quantities of those reserves. Future price changes are only
considered to the extent provided by contractual arrangements in existence at
year-end. The standardized measure of discounted future net cash flows is
achieved by using a discount rate of 10% a year to reflect the timing of future
net cash flows relating to proved oil and gas reserves.
 
                                        5
<PAGE>   7
 
     Estimates of proved oil and gas reserves are by their nature imprecise.
Estimates of future net revenue attributable to proved reserves are sensitive to
the unpredictable prices of oil and gas and other variables. Accordingly, under
the allocation method used to derive the Trust's quantity of proved reserves,
changes in prices will result in changes in quantities of proved oil and gas
reserves and estimated future net revenues.
 
     The 1998, 1997 and 1996 changes in the standardized measure of discounted
future net cash flows related to future royalty income from proved reserves
discounted at 10% are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                        1998       1997        1996
                                                      --------   ---------   --------
<S>                                                   <C>        <C>         <C>
Balance, January 1..................................  $213,504   $ 439,037   $106,937
Revisions of prior-year estimates, change in prices
  and other.........................................   (63,731)   (227,855)   338,208
Extensions, discoveries and other additions.........     3,667       7,915      4,612
Accretion of discount...............................    21,350      43,904     10,694
Royalty income......................................   (30,318)    (49,497)   (21,414)
                                                      --------   ---------   --------
Balance, December 31................................  $144,472   $ 213,504   $439,037
                                                      ========   =========   ========
</TABLE>
 
     Reserve quantities and revenues shown in the tables above for the Royalty
were estimated from projections of reserves and revenues attributable to the
combined BROG and Trust interests. Reserve quantities attributable to the
Royalty were derived from estimates by allocating to the Royalty a portion of
the total net reserve quantities of the interests, based upon gross revenue less
production taxes. Because the reserve quantities attributable to the Royalty are
estimated using an allocation of the reserves, any changes in prices or costs
will result in changes in the estimated reserve quantities allocated to the
Royalty. Therefore, the reserve quantities estimated will vary if different
future price and cost assumptions occur. The future net cash flows were
determined without regard to future federal income tax credits available to
production from coal seam wells.
 
     December average prices of $1.82 per Mcf of conventional gas, $1.30 per Mcf
of coal seam gas and $8.60 per Bbl of oil were used at December 31, 1998, in
determining future net revenue. The downward revision is primarily due to
significantly lower oil and gas prices in December 1998 as compared to December
1997.
 
     December average prices of $2.21 per Mcf of conventional gas, $1.55 per Mcf
of coal seam gas and $15.97 per Bbl of oil were used at December 31, 1997, in
determining future net revenue. The downward revision is primarily due to
significantly lower gas prices in December 1997 as compared to December 1996.
 
     December average prices of $4.04 per Mcf of conventional gas, $2.84 per Mcf
of coal seam gas and $23.18 per Bbl of oil were used at December 31, 1996, in
determining future net revenue. The upward revision is primarily due to
significantly higher gas prices in December 1996.
 
     The following presents estimated future net revenues and present value of
estimated future net revenues attributable to the Royalty for each of the years
ended December 31, 1998, 1997 and 1996 (in thousands except amounts per Unit):
 
<TABLE>
<CAPTION>
                                      1998                   1997                   1996
                              --------------------   --------------------   --------------------
                              ESTIMATED              ESTIMATED              ESTIMATED
                               FUTURE     PRESENT     FUTURE     PRESENT     FUTURE     PRESENT
                                 NET      VALUE AT      NET      VALUE AT      NET      VALUE AT
                               REVENUE      10%       REVENUE      10%       REVENUE      10%
                              ---------   --------   ---------   --------   ---------   --------
<S>                           <C>         <C>        <C>         <C>        <C>         <C>
Total Proved................  $241,205    $144,472   $372,830    $213,504   $822,131    $439,037
Proved Developed............  $234,973    $142,095   $365,509    $211,580   $799,664    $430,365
Total Proved Per Unit.......  $   5.18    $   3.10   $   8.00    $   4.58   $  17.64    $   9.42
</TABLE>
 
     Proved reserve quantities are estimates based on information available at
the time of preparation and such estimates are subject to change as additional
information becomes available. The reserves actually recovered
 
                                        6
<PAGE>   8
 
and the timing of production of those reserves may be substantially different
from the above estimates. Moreover, the present values shown above should not be
considered as the market values of such oil and gas reserves or the costs that
would be incurred to acquire equivalent reserves. A market value determination
would include many additional factors.
 
REGULATION
 
     Many aspects of the production, pricing and marketing of crude oil and
natural gas are regulated by federal and state agencies. Legislation affecting
the oil and gas industry is under constant review for amendment or expansion,
frequently increasing the regulatory burden on affected members of the industry.
 
     Exploration and production operations are subject to various types of
regulation at the federal, state and local levels. Such regulation includes
requiring permits for the drilling of wells, maintaining bonding requirements in
order to drill or operate wells, and regulating the location of wells, the
method of drilling and casing wells, the surface use and restoration of
properties upon which wells are drilled and the plugging and abandonment of
wells. Natural gas and oil operations are also subject to various conservation
laws and regulations that regulate the size of drilling and spacing units or
proration units and the density of wells which may be drilled and unitization or
pooling of oil and gas properties. In addition, state conservation laws
establish maximum allowable production from natural gas and oil wells, generally
prohibit the venting or flaring of natural gas and impose certain requirements
regarding the ratability of production. The effect of these regulations is to
limit the amounts of natural gas and oil that BROG can produce and to limit the
number of wells or the locations at which BROG can drill.
 
  Federal Natural Gas Regulation
 
     The Federal Energy Regulatory Commission (the "FERC") is primarily
responsible for federal regulation of natural gas. The interstate transportation
and sale for resale of natural gas is subject to federal governmental
regulation, including regulation of transportation and storage tariffs and
various other matters, by the FERC. The Natural Gas Wellhead Decontrol Act of
1989 ("Decontrol Act") terminated federal price controls on wellhead sales of
domestic natural gas on January 1, 1993. Consequently, sales of natural gas may
be made at market prices, subject to applicable contract provisions. The FERC's
jurisdiction over natural gas transportation and storage was unaffected by the
Decontrol Act.
 
     Sales of natural gas are affected by the availability, terms and cost of
transportation. The price and terms for access to pipeline transportation remain
subject to extensive federal and state regulation. Several major regulatory
changes have been implemented by Congress and the FERC from 1985 to the present
that affect the economics of natural gas production, transportation, and sales.
In addition, the FERC continues to promulgate revisions to various aspects of
the rules and regulations affecting those segments of the natural gas industry,
most notably interstate natural gas transmission companies, that remain subject
to the FERC's jurisdiction. These initiatives may also affect the intrastate
transportation of gas under certain circumstances. The stated purpose of many of
these regulatory changes is to promote competition among the various sectors of
the natural gas industry and these initiatives generally reflect more
light-handed regulation of the natural gas industry.
 
     Additional proposals and proceedings that might affect the natural gas
industry are considered from time to time by Congress, the FERC, state
regulatory bodies and the courts. The Trust cannot predict when or if any such
proposals might become effective, or their effect, if any, on the Trust. The
natural gas industry historically has been very heavily regulated; therefore,
there is no assurance that the less stringent regulatory approach pursued over
the last decade by the FERC and Congress will continue.
 
     Sales of crude oil, condensate and gas liquids are not currently regulated
and are made at market prices. Effective as of January 1, 1995, the FERC
implemented regulations establishing an indexing system for transportation rates
for oil that could increase the cost of transporting oil to the purchaser or
reduce wellhead prices for crude oil.
 
                                        7
<PAGE>   9
 
  Coal Seam Tax Credit
 
     The Trust began receiving royalty income from coal seam gas wells in 1989.
Under Section 29 of the Internal Revenue Code, coal seam gas production from
wells drilled prior to January 1, 1993 (including certain wells recompleted in
coal seams formations thereafter), generally qualifies for the federal income
tax credit for producing non-conventional fuels if such production and the sale
thereof occurs before January 1, 2003. For 1998, this tax credit is expected,
subject to the determination of the Treasury Department no later than April 1,
1999, to be in the range of approximately $1.05 (the approximate 1997 rate) to
$1.09 per MMBtu. For qualifying production of the Trust, each Unit holder must
determine his pro rata share of such production based upon the number of Units
owned during each month of the year and apply the tax credit against his own
income tax liability, but such credit may not reduce his regular liability
(after the foreign tax credit and certain other nonrefundable credits) below his
tentative minimum tax. Section 29 also provides that any amount of Section 29
credit disallowed for the tax year solely because of this limitation will
increase his credit for prior year minimum tax liability, which may be carried
forward indefinitely as a credit against the taxpayer's regular tax liability,
subject, however, to the limitations described in the preceding sentence. There
is no provision for the carryback or carryforward of the Section 29 credit in
any other circumstances.
 
     The Trustee is provided Section 29 tax credit information related to Trust
Properties by BROG. In 1997, the Tax Court upheld the IRS position that
nonconventional fuel such as coal seam gas does not qualify for the Section 29
credit unless the producer received a formal certification from the FERC. The
FERC's certification authority expired effective January 1, 1993. Many producers
believe that wells meeting the certification requirements are eligible for the
Section 29 credit regardless of the FERC certification. However, this position
is not in accordance with the IRS position or the decision of the Tax Court. The
court decision is on appeal and it is not possible to predict the likely
outcome. In the event the appeal is not successful, the ability of the Unit
holders to utilize allocated Section 29 credits in full could be questioned.
 
  Other Regulation
 
     The oil and natural gas industry is also subject to compliance with various
other federal, state and local regulations and laws, including, but not limited
to, environmental protection, occupational safety, resource conservation and
equal employment opportunity.
 
ITEM 3. LEGAL PROCEEDINGS
 
     On September 4, 1996, the Trustee announced the settlement of the
Litigation filed by the Trustee against BROG and Southland Royalty Company. The
Litigation, which was filed in the state district court of Santa Fe County, New
Mexico, Cause No. SF 94-1982(c), was dismissed on September 12, 1996.
 
     The claims asserted on behalf of the Trust in the Litigation included
breach of contract, breach of the covenant of good faith and fair dealing,
breach of express good faith duty, constructive fraud, unjust enrichment, prima
facie tort, intentional interference with contract and conspiracy. The relief
sought included compensatory and punitive damages, an accounting and an
injunction relating to marketing the production from the Underlying Properties.
BROG has denied and continues to deny the allegations made against it in the
Litigation, but the parties have agreed to settle the Litigation as outlined
herein.
 
     BROG agreed (i) to pay $19,750,000 in cash plus interest earnings thereon
from September 5, 1996, in settlement of underpayment of royalty claims of the
Trust; and (ii) commencing in 1997, to credit the Trust with $250,000 per year
for five years as an offset against lease operating expenses chargeable to the
Trust. BROG also agreed to make certain adjustments that represent cost
reductions favorable to the Trust in the ongoing charges for coal seam gas
gathering and treating on BROG's Val Verde system. Additionally, the Trustee and
BROG established a formal protocol intended to provide the Trustee and its
representatives improved access to BROG's books and records applicable to the
Underlying Properties.
 
     Agreement was also reached regarding marketing arrangements for the sale of
Trust gas, oil and natural gas liquids products going forward as more
particularly described in "Pricing Information" under Item 2. Properties herein.
 
                                        8
<PAGE>   10
 
     The $19,750,000 (or $.423739 per unit of beneficial interest) was paid to
the Trust on September 30, 1996 and distributed on October 15, 1996, to
unitholders of record as of September 30, 1996, (the "Record Date"). The
distribution was taxable to unit holders as of such Record Date. This
distribution was in addition to the regular monthly distribution on October 15,
1996.
 
     A lawsuit has been commenced against BROG by certain royalty and overriding
royalty owners on behalf of those persons similarly situated. The suit involves
properties that are burdened by the Trust's royalty interest. This case is one
of six virtually identical class actions filed against New Mexico gas producers.
All such cases have been consolidated in the First Judicial District of Santa Fe
County, New Mexico in a case filed September 1, 1995 and styled San Juan 1990-A,
L.P., et al. v. El Paso Production Company and Meridian Oil Inc. The plaintiffs
allege that they and members of the proposed class have been underpaid for
royalties and overriding royalties. The plaintiffs have sought to certify the
actions as class actions and seek monetary damages. The court has denied class
certification. Because of the pending nature of the litigation, exposure to the
Trust from this suit cannot be quantified. However, if the plaintiffs who have
interests in properties that are burdened by the Trust are successful, royalty
income received by the Trust could decrease.
 
     In addition, the Trust is aware of an administrative claim initiated by the
Mineral Management Service of the United States Department of the Interior (the
"MMS") against BROG by demand letter dated March 17, 1997 regarding a gas
contract settlement dated March 1, 1990, between BROG and certain other parties
thereto. The claim alleges that additional royalties are due on production from
federal and Indian leases in the State of New Mexico on properties that are
burdened by the Royalty. BROG filed its statement of reasons in June 1997
thereby contesting whether the royalties are payable as claimed. If the MMS
claim is successful, royalty income received by the Trust could decrease.
 
     For additional information concerning legal proceedings, Note 5 of the
Notes to Financial Statements at pages 14 and 15 of the Trust's Annual Report to
security holders for the year ended December 31, 1998 are herein incorporated by
reference.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No matters were submitted to a vote of Unit holders, through the
solicitation of proxies or otherwise, during the fourth quarter ended December
31, 1998.
 
                                        9
<PAGE>   11
 
                                    PART II
 
ITEM 5. MARKET FOR UNITS OF THE TRUST AND RELATED SECURITY HOLDER MATTERS
 
     The information under "Units of Beneficial Interest" at page 1 of the
Trust's Annual Report to security holders for the year ended December 31, 1998,
is herein incorporated by reference.
 
ITEM 6. SELECTED FINANCIAL DATA
 
<TABLE>
<CAPTION>
                                                FOR THE YEAR ENDED DECEMBER 31,
                              -------------------------------------------------------------------
                                 1998          1997          1996          1995          1994
                              -----------   -----------   -----------   -----------   -----------
<S>                           <C>           <C>           <C>           <C>           <C>
Royalty income(1)...........  $30,317,860   $49,497,479   $41,236,424   $15,156,292   $23,280,188
Distributable income........   29,598,402    48,648,930    37,803,167    13,790,101    22,632,493
Distributable income per
  Unit......................     0.635039      1.043770      0.811072      0.295867      0.485584
Distributions per Unit......     0.635039      1.043770      0.811072      0.295867      0.485584
Total assets, December 31...   53,753,582    61,231,280    65,935,976    70,554,982    75,531,405
</TABLE>
 
---------------
 
(1) The royalty income distributions for 1996 include material payments received
    in settlement of litigation as more particularly described under "Item 2.
    Properties" herein.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION
 
     The "Trustee's Discussion and Analysis" and "Results of the 4th Quarters of
1998 and 1997" at pages 7 through 9 of the Trust's Annual Report to
securityholders for the year ended December 31, 1998, are herein incorporated by
reference.
 
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
 
     The Trust has not entered into derivative financial instruments, derivative
commodity instruments or other similar instruments during 1998. As discussed in
Item 2. Properties -- Pricing Information, the Trust does not market the Trust
gas, oil and/or natural gas liquids. BROG is responsible for such marketing.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The Financial Statements of the Trust and the notes thereto at page 10 et
seq., of the Trust's Annual Report to security holders for the year ended
December 31, 1998, are herein incorporated by reference.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
     None.
 
                                       10
<PAGE>   12
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The Trust has no directors or executive officers. The Trustee is a
corporate trustee which 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.
 
ITEM 11. EXECUTIVE COMPENSATION
 
     During the year ended December 31, 1998, the Trustee received total
remuneration as follows:
 
<TABLE>
<CAPTION>
            NAME OF INDIVIDUAL OR NUMBER OF              CAPACITIES IN WHICH       CASH
                   PERSONS IN GROUP                            SERVED          COMPENSATION
            -------------------------------              -------------------   ------------
<S>                                                      <C>                   <C>
Bank One, Texas, N.A...................................        Trustee           $69,494(1)
</TABLE>
 
---------------
 
(1) Under the Trust Indenture, the Trustee is entitled to an administrative fee
    for its administrative services, preparation of quarterly and annual
    statements with attention to tax and legal matters of: (i) 1/20 of 1% of the
    first $100 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 Trustee's standard hourly rates for time in excess of 300 hours
    annually. The administrative fee is subject to reduction by a credit for
    funds provision.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     (a) Security Ownership of Certain Beneficial Owners. The following table
sets forth, as of December 31, 1998, information with respect to each person
known to own beneficially more than 5% of the outstanding Units of the Trust:
 
<TABLE>
<CAPTION>
                                                            AMOUNT AND
                                                       NATURE OF BENEFICIAL
                  NAME AND ADDRESS                          OWNERSHIP         PERCENT OF CLASS
                  ----------------                     --------------------   ----------------
<S>                                                    <C>                    <C>
Fund American Enterprises Holdings, Inc.(1)..........    5,994,876 Units            14.4%
80 South Main Street
Hanover, New Hampshire 03755
Societe General Asset Management Corp.(2)............    5,180,000 Units            11.1%
1221 Avenue of the Americas
New York, New York 10020
Capital Guardian Trust Company(3)....................    4,218,800 Units             9.1%
11100 Santa Monica Boulevard
Los Angeles, California 90025
</TABLE>
 
---------------
 
(1) This information was provided to the Trust on Amendment Number 8 to Schedule
    13D, dated December 2, 1997, as filed with the Securities and Exchange
    Commission (the "SEC") by Fund American Enterprises Holdings, Inc. ("FAEH"),
    which indicated that these Units were owned by Fund American Enterprises,
    Inc. The Amendment Number 8 to Schedule 13D may be reviewed for more
    detailed information concerning the matters summarized herein.
 
(2) This information was provided to the Trust on Amendment Number 3 to Schedule
    13G, dated February 6, 1999, as filed with the SEC. The Amendment Number 3
    to Schedule 13G may be reviewed for more detailed information concerning the
    matters summarized herein.
 
(3) This information was provided to the SEC and to the Trust in Amendment to
    Schedule 13G, dated February 12, 1999. Capital Guardian Trust Company
    reports sole voting power over 3,543,800 Units and sole dispositive power
    over 4,218,800 Units. The Amendment Number 4 to Schedule 13G filed with the
    SEC may be reviewed for more detailed information concerning the matters
    summarized herein.
 
                                       11
<PAGE>   13
 
     (b) Security Ownership of Management. In various fiduciary capacities, Bank
One, Texas, N.A. owned, as of December 31, 1998, an aggregate of 89,472 Units
with the sole right to vote 33,672 of these Units, the shared right to vote
1,000 of these Units, and no right to vote 54,800 of these Units. Bank One,
Texas, N.A. disclaims any beneficial interest in these Units. The number of
Units reflected in this paragraph includes Units held by all branches of Bank
One, Texas, N.A.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The Trust has no directors or executive officers. See Item 11 for the
remuneration received by the Trustee during the year ended December 31, 1998 and
Item 12(b) for information concerning Units owned by Bank One, Texas, N.A. in
various fiduciary capacities.
 
                                       12
<PAGE>   14
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     The following documents are filed as a part of this Report:
 
FINANCIAL STATEMENTS
 
     Included in Part II of this Report by reference to the Annual Report of the
Trust for the year ended December 31, 1998:
 
         Independent Auditors' Report
         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.
 
<TABLE>
<CAPTION>
        EXHIBIT
         NUMBER                                  DESCRIPTION
        -------                                  -----------
<C>                      <S>
         (4)(a)          -- San Juan Basin Royalty Trust Indenture, dated November 3,
                            1980, between Southland Royalty Company and The Fort
                            Worth National Bank (now Bank One, Texas, N.A.), as
                            Trustee, heretofore filed as Exhibit 4(a) to the Trust's
                            Annual Report on Form 10-K to the SEC for the fiscal year
                            ended December 31, 1980, is incorporated herein by
                            reference.*
            (b)          -- Net Overriding Royalty Conveyance from Southland Royalty
                            Company to the Forth Worth National Bank (now Bank One,
                            Texas, N.A.), as Trustee, dated November 3, 1980 (without
                            Schedules), heretofore filed as Exhibit 4(b) to the
                            Trust's Annual Report on Form 10-K to the SEC for the
                            fiscal year ended December 31, 1980, is incorporated
                            herein by reference.*
        (13)             -- Registrant's Annual Report to security holders for fiscal
                            year ended December 31, 1998.**
        (23)             -- Consent of Cawley, Gillespie & Associates, Inc.,
                            reservoir engineer.**
        (27)             -- Financial Data Schedule.**
</TABLE>
 
---------------
 
 * A copy of this Exhibit is available to any Unit holder, at the actual cost of
   reproduction, upon written request to the Trustee, Bank One, Texas, N.A.,
   P.O. Box 2604, Fort Worth, Texas 76113.
 
** Filed herewith.
 
REPORTS ON FORM 8-K
 
     During the last quarter of the Trust fiscal year ended December 31, 1998,
no reports on Form 8-K were filed with the Securities and Exchange Commission by
the Trust.
 
                                       13
<PAGE>   15
 
                                   SIGNATURE
 
     Pursuant to the Requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 
                                            BANK ONE, TEXAS, N.A.
                                            TRUSTEE OF THE SAN JUAN BASIN
                                              ROYALTY TRUST
 
                                            By:    /s/ LEE ANN ANDERSON
                                              ----------------------------------
                                                      (Lee Ann Anderson)
                                                        Vice President
 
Date: March 31, 1999
 
               (The Trust has no directors or executive officers)
 
                                       14
<PAGE>   16
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<C>        <S>
 (4)(a)    -- San Juan Basin Royalty Trust Indenture, dated November 3,
              1980, between Southland Royalty Company and The Fort
              Worth National Bank (now Bank One, Texas, N.A.), as
              Trustee, heretofore filed as Exhibit 4(a) to the Trust's
              Annual Report on Form 10-K to the SEC for the fiscal year
              ended December 31, 1980, is incorporated herein by
              reference.*
    (b)    -- Net Overriding Royalty Conveyance from Southland Royalty
              Company to the Forth Worth National Bank (now Bank One,
              Texas, N.A.), as Trustee, dated November 3, 1980 (without
              Schedules), heretofore filed as Exhibit 4(b) to the
              Trust's Annual Report on Form 10-K to the SEC for the
              fiscal year ended December 31, 1980, is incorporated
              herein by reference.*
   (13)    -- Registrant's Annual Report to security holders for fiscal
              year ended December 31, 1998.**
   (23)    -- Consent of Cawley, Gillespie & Associates, Inc.,
              reservoir engineer.**
   (27)    -- Financial Data Schedule.**
</TABLE>
 
---------------
 
 * A copy of this Exhibit is available to any Unit holder, at the actual cost of
   reproduction, upon written request to the Trustee, Bank One, Texas, N.A.,
   P.O. Box 2604, Fort Worth, Texas 76113.
 
** Filed herewith.