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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ Quarterly
Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
 For the Quarterly Period Ended June 30, 2005  or
 o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 Commission File No. 1-8032
 SAN JUAN BASIN ROYALTY TRUST
  Texas
    
    75-6279898(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 
 
 
 þ o
 þ o




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TABLE OF CONTENTS  PART IItem 1. Financial StatementsItem 2. Trustees Discussion and Analysis of Financial Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPART IIItem 1. Legal ProceedingsItem 6. ExhibitsSIGNATURESINDEX TO EXHIBITSCertification Required by Rule 13a-14(a)Certification Required by Rule 13a-14(b)    Table of Contents  SAN JUAN BASIN ROYALTY TRUST
 
 PART I
 FINANCIAL INFORMATION
 
 Item 1. Financial Statements.
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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED
STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 June 30,
    
    December 31,2005
    
    2004(Unaudited)ASSETSCash and short-term investments
    
    $
    12,334,766
    
    
    $
    10,140,045Net overriding royalty interest in
producing oil and gas properties
(net of accumulated amortization of
$108,077,625 and $106,600,707 at
June 30, 2005 and December 31,
2004, respectively)
    
    
    25,197,903
    
    
    
    26,674,821$
    37,532,669
    
    
    $
    36,814,866LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    12,219,908
    
    
    $
    10,025,187Cash reserves
    
    
    114,858
    
    
    
    114,858Trust
corpus   46,608,796 Units of
beneficial interest authorized and
outstanding
    
    
    25,197,903
    
    
    
    26,674,821$
    37,532,669
    
    
    $
    36,814,866
 CONDENSED
STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Royalty income
    
    $
    35,295,797
    
    
    $
    25,509,188
    
    
    $
    74,538,084
    
    
    $
    46,705,539Interest income
    
    
    36,920
    
    
    
    11,822
    
    
    
    65,357
    
    
    
    20,51435,332,717
    
    
    
    25,521,010
    
    
    
    74,603,441
    
    
    
    46,726,053General and
administrative
expenditures
    
    
    813,658
    
    
    
    529,205
    
    
    
    1,348,166
    
    
    
    1,042,368Distributable income
    
    $
    34,519,059
    
    
    $
    24,991,805
    
    
    $
    73,255,275
    
    
    $
    45,683,685Distributable
income per Unit
(46,608,796 Units)
    
    $
    .740612
    
    
    $
    .536204
    
    
    $
    1.571704
    
    
    $
    .980152
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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED
STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Trust corpus, beginning of period
    
    $
    25,912,908
    
    
    $
    29,131,300
    
    
    $
    26,674,821
    
    
    $
    29,822,820Amortization of net overriding
royalty interest
    
    
    (715,005
    )
    
    
    (792,390
    )
    
    
    (1,476,918
    )
    
    
    (1,483,910
    )Distributable income
    
    
    34,519,059
    
    
    
    24,991,805
    
    
    
    73,255,275
    
    
    
    45,683,685Distributions declared
    
    
    (34,519,059
    )
    
    
    (24,991,805
    )
    
    
    (73,255,275
    )
    
    
    (45,683,685
    )Trust corpus, end of period
    
    $
    25,197,903
    
    
    $
    28,338,910
    
    
    $
    25,197,903
    
    
    $
    28,338,910
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SAN JUAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF ACCOUNTINGThe San Juan Basin Royalty Trust (the Trust) was established as of November 1, 1980. The
financial statements of the Trust are prepared on the following basis:
 
    
    Royalty income recorded for a month is the amount computed and paid with respect to
the Trusts 75% net overriding royalty interest (the Royalty) in certain oil and gas
leasehold and royalty interests (the Underlying Properties) by Burlington Resources
Oil & Gas Company LP (BROG), the present owner of the Underlying Properties, to the
Trustee for the Trust. Royalty income consists of the proceeds received by BROG from
the sale of production from the Underlying Properties less accrued production costs,
development and drilling costs, applicable taxes, operating charges, and other costs
and deductions, multiplied by 75%. The calculation of net proceeds by BROG for any
month includes adjustments to proceeds and costs for prior months and impacts the
Royalty income paid to the Trust and the distribution to Unit Holders for that month.
    
    Trust expenses recorded are based on liabilities paid and cash reserves established
from Royalty income for liabilities and contingencies.
    
    Distributions to Unit Holders are recorded when declared by the Trustee.
    
    The conveyance which transferred the Royalty to the Trust provides that any excess
of development and production costs applicable to the Underlying Properties over gross
proceeds from such properties must be recovered from future net proceeds before Royalty
income is again paid to the Trust.
 The financial statements of the Trust differ from financial statements prepared in
accordance with United States generally accepted accounting principles (GAAP) because
revenues are not accrued in the month of production; certain cash reserves may be
established for contingencies which would not be accrued in financial statements prepared in
accordance with GAAP; expenses are recorded when paid instead of when incurred; and
amortization of the Royalty calculated on a unit-of-production basis is charged directly to
trust corpus instead of an expense. The basis of accounting used by the Trust is widely
used by royalty trusts for financial reporting purposes.2.
    
    FEDERAL INCOME TAXESFor federal income tax purposes, the Trust constitutes a fixed investment trust which is
taxed as a grantor trust. A grantor trust is not subject to tax at the trust level. The
Unit Holders are considered to own the Trusts income and principal as though no trust were
in existence. The income of the Trust is deemed to have been received or accrued by each
Unit Holder at the time such income is received or accrued by the Trust rather than when
distributed by the Trust.The Royalty constitutes an economic interest in oil and gas properties for federal income
tax purposes. Unit Holders must report their share of the revenues of the Trust as ordinary
income from
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oil and gas royalties and are entitled to claim depletion with respect to such income. The
Royalty is treated as a single property for depletion purposes. The Trust has on file
technical advice memoranda confirming such tax treatment.Sales of production from coal seam wells drilled prior to January 1, 1993, qualified for
federal income tax credits through 2002 but not thereafter. Congress has at various times
since 2002 considered energy legislation, including provisions to reinstate the Section 29
credit in various ways and to various extents. On July 29, 2005, Congress approved new
energy legislation which, among other things, modifies the Section 29 credit in several
respects, but does not extend the credit for production from coal seam wells. Once this
legislation is enacted into law, the application, if any, of the revised Section 29 credit
to the Trust and its Unit Holders is unclear.The classification of the Trusts income for purposes of the passive loss rules may be
important to a Unit Holder. As a result of the Tax Reform Act of 1986, royalty income such
as that derived through the Trust will generally be treated as portfolio income and will not
reduce passive losses.3.
    
    CONTINGENCIESSee Part II, Item 1, Legal Proceedings concerning the status of litigation matters.4.
    
    SETTLEMENTSIn June 2000, the Trust and BROG entered into a partial settlement of claims relating to a
gas imbalance with respect to production from mineral properties currently operated by BROG.
Under the terms of the partial settlement BROG paid the Trust $3,490,000 to settle the
imbalance insofar as it relates to some of the wells located on the Underlying Properties.
The remainder of the imbalance has been addressed by a combination of volume adjustments and
a $243,968 increase in revenue included in net proceeds paid to the Trust by BROG in July
2004.During 2004, commencing in July of that year, an aggregate of $3,314,808 was included in
calculating net proceeds paid to the Trust by BROG as part of the ongoing negotiation of
joint interest audit exceptions, interest for resolved audit exceptions, and insurance
proceeds for a business interruption claim.In March 2005, as part of the ongoing negotiations between the Trust and BROG concerning a
number of revenue and expense audit issues, $833,851 was included in calculating net
proceeds paid to the Trust by BROG in settlement of claims for interest on late payments of
net proceeds and in settlement of certain other audit issues. Of that amount, $822,077 was
included in settlement of claims for additional revenue and $11,774 was included in
settlement of claims concerning disputed lease operating expenses.In May 2005, as part of the ongoing negotiations between the Trust and BROG concerning a
number of revenue and expense audit issues, $988,392 was included in calculating net
proceeds paid to the Trust by BROG in settlement of certain of those issues. Of that amount,
$982,038 was included in net proceeds paid to the Trust by BROG in settlement of claims for
additional revenue and $6,354 was included in net proceeds in settlement of claims
concerning disputed lease operating expenses.
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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
 ForwardLooking Information
  Principal Trust Risk Factors
  Oil 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.
  
    
    political conditions worldwide, in particular political disruption, war or other
armed conflicts in oil producing regions;
    
    worldwide economic conditions;
    
    weather conditions;
    
    the supply and price of foreign oil and gas;
    
    the level of consumer demand;
    
    the price and availability of alternative fuels;
    
    the proximity to, and capacity of, transportation facilities; and
    
    the effect of worldwide energy conservation measures.
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Increased costs of production and development will result in decreased Trust distributions.
   Trust 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.
  
    
    historical production from the area compared with production rates from similar
producing areas;
    
    the assumed effect of governmental regulation; and
    
    assumptions about future commodity prices, production and development costs,
severance and excise taxes, and capital expenditures.
  The operators of the Underlying Properties are subject to extensive governmental regulation.
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Operating risks for BROG and other operators of the Underlying Properties can adversely affect
Trust distributions.
  None of the Trustee, the Trust nor the Unit Holders control the operation or development of
the Underlying Properties.
  The Royalty can be sold and the Trust can be terminated in certain circumstances.
  Mineral properties, such as the Underlying Properties, are depleting assets and, if BROG or
other operators of the Underlying Properties do not perform additional development projects, the
Royalty may deplete faster than expected.
  Unit Holders have limited voting rights.
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Business Overview
     Three Months Ended June 30, 2005 and 2004
  April
    
    $
    .214535May
    
    
    .263897June
    
    
    .262180Quarter Total
    
    $
    .740612
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Three Months EndedJune 30,2005
    
    2004Gas:Total sales (Mcf)
    
    
    10,789,471
    
    
    
    10,831,487Mcf per day
    
    
    121,230
    
    
    
    120,350Average price (per
Mcf)
    
    $
    5.43
    
    
    $
    4.38Oil:Total sales (Bbls)
    
    
    17,472
    
    
    
    23,709Bbls per day
    
    
    196
    
    
    
    263Average price (per
Bbl)
    
    $
    47.79
    
    
    $
    31.72
  Three Months EndedJune 30,2005
    
    2004Gas sales (Mcf)
    
    
    6,887,037
    
    
    
    6,392,963Oil sales
(Bbls)
    
    
    11,155
    
    
    
    13,986
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Six Months Ended June 30, 2005 and 2004
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Six Months EndedJune 30,2005
    
    2004Gas:Total sales (Mcf)
    
    
    22,151,787
    
    
    
    21,860,720Mcf per day
    
    
    122,386
    
    
    
    120,114Average price (per Mcf)
    
    $
    5.73
    
    
    $
    4.27Oil:Total Sales (Bbls)
    
    
    36,061
    
    
    
    38,564Bbls per day
    
    
    199
    
    
    
    212Average price (per Bbl)
    
    $
    45.26
    
    
    $
    30.31
 Gas and oil sales attributable to the Royalty for the six months ended June 30,
2005 and 2004 were as follows:
 Six Months EndedJune 30,2005
    
    2004Gas sales (Mcf)
    
    
    13,920,798
    
    
    
    11,898,659Oil sales (Bbls)
    
    
    22,696
    
    
    
    21,313
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Calculation of Royalty Income
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2005
    
    2004
    
    2005
    
    2004Gross proceeds of sales from the
Underlying Properties:Gas proceeds
    
    $
    58,627,002
    
    
    $
    47,418,520
    
    
    $
    126,963,885
    
    
    $
    93,439,283Oil proceeds
    
    
    834,924
    
    
    
    752,081
    
    
    
    1,632,125
    
    
    
    1,168,844Other
    
    
    1,309,384
    (1)
    
    
    
    
    
    
    2,405,486
    (1)(2)
    
    
    Total
    
    
    60,771,310
    
    
    
    48,170,601
    
    
    
    131,001,496
    
    
    
    94,608,127Less production costs:Severance
tax  gas
    
    
    5,616,749
    
    
    
    4,714,629
    
    
    
    12,667,531
    
    
    
    9,267,453Severance
tax  oil
    
    
    80,824
    
    
    
    76,676
    
    
    
    166,885
    
    
    
    120,936Lease operating expense and property
tax
    
    
    5,176,367
    (1)
    
    
    4,738,586
    
    
    
    10,008,993
    (1)(2)
    
    
    8,863,441Other
    
    
    42,505
    
    
    
    42,763
    
    
    
    42,505
    
    
    
    42,763Capital expenditures
    
    
    2,793,802
    
    
    
    4,585,697
    (3)
    
    
    8,731,469
    
    
    
    14,039,482
    (3)Total
    
    
    13,710,247
    
    
    
    14,158,351
    
    
    
    31,617,383
    
    
    
    32,334,075Less excess production costs and
interest from prior year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net profits
    
    
    47,061,063
    
    
    
    34,012,250
    
    
    
    99,384,113
    
    
    
    62,274,052Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    35,295,797
    
    
    $
    25,509,188
    
    
    $
    74,538,084
    
    
    $
    46,705,539
 
 (1)
    
    In May 2005, as part of the ongoing negotiations between the Trust and BROG
concerning a number of revenue and expense audit issues, $988,392 was included in calculating
net proceeds paid to the Trust by BROG in settlement of certain of those audit issues. Of
that amount, $982,038 was included in net proceeds paid to the Trust by BROG in settlement of
claims for additional revenue and $6,354 was included in net proceeds in settlement of claims
concerning disputed lease operating expenses.(2)
    
    In March 2005, as part of the ongoing negotiations between the Trust and BROG concerning a
number of revenue and expense audit issues, $833,851 was included in calculating net proceeds
paid to the Trust by BROG in settlement of claims for interest on late payments of net
proceeds and in settlement of certain other audit issues. Of that amount, $822,077 was
included in settlement of claims for additional revenue and $11,774 was included in settlement
of claims concerning disputed lease operating expenses.(3)
    
    In July 2004, BROG reduced the capital expenditures accrued for the Underlying
Properties for the month of July by approximately $1 million, resulting in a corresponding
increase in the Royalty income received by the Trust in July 2004. Such adjustment is not
reflected in this table as it occurred after June 30, 2004. 15




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Contractual Obligations
  Effects of Securities Regulation
  Critical Accounting Policies
  
    
    Royalty income recorded for a month is the amount computed and paid pursuant to
the Conveyance by BROG to the Trustee for the Trust. Royalty income consists of
the proceeds received by BROG from the sale of production from the Underlying
Properties less accrued production costs, development and drilling costs,
applicable taxes, operating charges, and other costs and deductions, multiplied by
75%. The calculation of net proceeds by BROG for any month includes adjustments to
proceeds and costs for prior months and impacts the Royalty income paid to the
Trust and the distribution to Unit Holders for that month.
    
    Trust expenses recorded are based on liabilities paid and cash reserves
established from royalty income for liabilities and contingencies.
    
    Distributions to Unit Holders are recorded when declared by the Trustee.
    
    The Conveyance which transferred the Royalty to the Trust provides that any
excess of development and production costs applicable to the Underlying Properties
over gross proceeds from such properties must be recovered from future net proceeds
before Royalty income is again paid to the Trust.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
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PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings.
   
 Item 6. Exhibits.
 4(a)
    
    Amended and Restated Royalty Trust Indenture, dated September 30, 2002 (the
original Royalty Trust Indenture, dated November 1, 1980 having been entered into
between Southland Royalty Company and The Fort Worth National Bank, as Trustee),
heretofore filed as Exhibit 99.2 to the Trusts Current Report on Form 8-K filed with
the Commission on October 1, 2002, is incorporated herein by reference.*4(b)
    
    Net Overriding Royalty Conveyance from Southland Royalty Company to the Fort
Worth National Bank, as Trustee, dated November 3, 1980 (without Schedules), heretofore
filed as Exhibit 4(b) to the Trusts Annual Report on Form 10-K filed with the
Commission for the fiscal year ended December 31, 1980, is incorporated herein by
reference.*4(c)
    
    Assignment of Net Overriding Interest (San Juan Basin Royalty Trust), dated
September 30, 2002, between Bank One, N.A. and TexasBank, heretofore filed as Exhibit
4(c) to the Trusts Quarterly Report on Form 10-Q filed with the Commission for the
quarter ended September 30, 2002, is incorporated herein by reference.*31
    
    Certification required by Rule 13a-14(a), dated August 9, 2005, by Lee Ann
Anderson, Vice President and Trust Officer of TexasBank, the Trustee of the Trust.**
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32
    
    Certification required by Rule 13a-14(b), dated August 9, 2005, by Lee Ann
Anderson, Vice President and Trust Officer of TexasBank, on behalf of TexasBank, the
Trustee of the Trust.***
 
 *
    
    A copy of this exhibit is available to any Unit Holder (free of charge) upon written request
to the Trustee, TexasBank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith. 19




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SIGNATURES
  TEXASBANK, AS TRUSTEE FOR
THE SAN JUAN BASIN ROYALTY TRUSTBy:
    /s/ Lee Ann AndersonLee Ann AndersonVice President and Trust Officer




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INDEX
TO EXHIBITS
 ExhibitNumber
    
    Description4(a)
    
    Amended and Restated Royalty Trust Indenture, dated September 30,
2002 (the original Royalty Trust Indenture, dated November 1, 1980
having been entered into between Southland Royalty Company and The
Fort Worth National Bank, as Trustee), heretofore filed as Exhibit
99.2 to the Trusts Current Report on Form 8-K filed with the
Commission on October 1, 2002, is incorporated herein by
reference.*4(b)
    
    Net Overriding Royalty Conveyance from Southland Royalty Company
to the Fort Worth National Bank, as Trustee, dated November 3,
1980 (without Schedules), heretofore filed as Exhibit 4(b) to the
Trusts Annual Report on Form 10-K filed with the Commission for
the fiscal year ended December 31, 1980, is incorporated herein by
reference.*4(c)
    
    Assignment of Net Overriding Interest (San Juan Basin Royalty
Trust), dated September 30, 2002, between Bank One, N.A. and
TexasBank, heretofore filed as Exhibit 4(c) to the Trusts
Quarterly Report on Form 10-Q filed with the Commission for the
quarter ended September 30, 2002, is incorporated herein by
reference.*31
    
    Certification required by Rule 13a-14(a), dated August 9, 2005, by
Lee Ann Anderson, Vice President and Trust Officer of TexasBank,
the Trustee of the Trust.**32
    
    Certification required by Rule 13a-14(b), dated August 9, 2005, by
Lee Ann Anderson, Vice President and Trust Officer of TexasBank,
on behalf of TexasBank, the Trustee of the Trust.***
 
 *
    
    A copy of this exhibit is available to any Unit Holder (free of charge) upon written request
to the Trustee, TexasBank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith.