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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 March 31, 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
(State or other jurisdiction
of incorporation or organization)
    
    75-6279898
(I.R.S. Employer
Identification No.)
 TexasBank, Trust Department
2525 Ridgmar Boulevard, Suite 100
Fort Worth, Texas 76116
(Address of principal executive offices)
(Zip Code) (866) 809-4553
(Registrants telephone number, including area code) N/A
(Former name, former address and former fiscal year, if changed since last report) 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 þ No o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). Yes þ No o Number of Units of beneficial interest outstanding at May 10, 2005: 46,608,796   1




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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. The condensed financial statements included herein have been prepared without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 47, released September 16, 1982,
the financial statements of the San Juan Basin Royalty Trust (the Trust) continue to be prepared
in a manner that differs from accounting principles generally accepted in the United States of
America (GAAP); this form of presentation is customary to other royalty trusts. Certain
information and footnote disclosures normally included in annual financial statements have been
condensed or omitted pursuant to Rule 10-01 of Regulation S-X promulgated under the Securities
Exchange Act of 1934, although TexasBank, the Trustee of the Trust, believes that the disclosures
are adequate to make the information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements and the notes thereto
included in the Trusts Annual Report on Form 10-K for the year ended December 31, 2004. In the
opinion of the Trustee, all adjustments, consisting only of normal recurring adjustments, have been
included that are necessary to present fairly the assets, liabilities and trust corpus of the San
Juan Basin Royalty Trust at March 31, 2005, and the distributable income and changes in trust
corpus for the three-month periods ended March 31, 2005 and 2004. The distributable income for
such interim periods is not necessarily indicative of the distributable income for the full year. 2




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SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS  March 31,
    
    
    December 31,2005
    
    
    2004(Unaudited)ASSETSCash and short-term investments
    
    $
    14,033,190
    
    
    $
    10,140,045Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $107,362,620 and $106,600,707
at March 31, 2005 and December 31, 2004, respectively)
    
    
    25,912,908
    
    
    
    26,674,821$
    39,946,098
    
    
    $
    36,814,866LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    13,918,332
    
    
    $
    10,025,187Cash reserves
    
    
    114,858
    
    
    
    114,858Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding
    
    
    25,912,908
    
    
    
    26,674,821$
    39,946,098
    
    
    $
    36,814,866
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)  Three Months EndedMarch 31,2005
    
    
    2004Royalty income
    
    $
    39,242,287
    
    
    $
    21,196,352Interest income
    
    
    28,437
    
    
    
    8,69239,270,724
    
    
    
    21,205,044General and administrative expenditures
    
    
    534,508
    
    
    
    513,163Distributable income
    
    $
    38,736,216
    
    
    $
    20,691,881Distributable income per Unit (46,608,796 Units)
    
    $
    0.831092
    
    
    $
    0.443948
 The accompanying notes to condensed financial statements are an integral part of these
statements. 3




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SAN JUAN BASIN ROYALTY TRUST CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)  Three Months EndedMarch 31,2005
    
    
    2004Trust corpus, beginning of period
    
    $
    26,674,821
    
    
    $
    29,822,820Amortization of net overriding royalty interest
    
    
    (761,913
    )
    
    
    (691,520
    )Distributable income
    
    
    38,736,216
    
    
    
    20,691,881Distributions declared
    
    
    (38,736,216
    )
    
    
    (20,691,881
    )Total corpus, end of period
    
    $
    25,912,908
    
    
    $
    29,131,300
 The accompanying notes to condensed financial statements are an integral part of these
statements. 4




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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 net 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%. Any adjustments to the Royalty income
received from BROG are recorded by the Trust when received and impact 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 production costs over gross proceeds must be recovered from future net profits
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 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. 5




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Sales of production from coal seam wells drilled prior to January 1, 1993, qualified for
federal income tax credits through 2002 but not thereafter. Although 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, whether such provisions will
be enacted into law, and if so, the effect thereof on the Trust and the Unit Holders is, at
present, unknown.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.
    SETTLEMENT OF CLAIMS RELATING TO GAS IMBALANCEIn 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 allocated by BROG to the Trust in July 2004.5.
    SETTLEMENTSDuring 2004, commencing in July of that year, an aggregate of $3,314,808 was allocated 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 paid by BROG to the Trust 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 allocated to the Trust as
additional revenue and $11,774 was deducted from lease operating expenses allocated to the
Trust. 6




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Item 2.
Trustees Discussion and Analysis of Financial Condition and Results of Operations. Forward-Looking Information Certain information included in this Quarterly Report on Form 10-Q contains, and other
materials filed or to be filed by the Trust with the Securities and Exchange Commission (as well as
information included in oral statements or other written statements made or to be made by the
Trust) may contain or include, forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, and Section 27A of the Securities Act of 1933. Such
forward-looking statements may be or may concern, among other things, capital expenditures,
drilling activity, development activities, production efforts and volumes, hydrocarbon prices,
estimated future net revenues, estimates of reserves, the results of the Trusts activities, and
regulatory matters. Such forward-looking statements generally are accompanied by words such as
may, will, estimate, expect, predict, project, anticipate, goal, should,
assume, believe, plan, intend, or other words that convey the uncertainty of future events
or outcomes. Such statements reflect BROGs current view with respect to future events; are based
on an assessment of, and are subject to, a variety of factors deemed relevant by TexasBank, the
Trustee of the Trust, and BROG and involve risks and uncertainties. These risks and uncertainties
include volatility of oil and gas prices, product supply and demand, competition, regulation or
government action, litigation and uncertainties about estimates of reserves. Should one or more of
these risks or uncertainties occur, actual results may vary materially and adversely from those
anticipated. Principal Trust Risk Factors Although risk factors are described elsewhere in this Quarterly Report on Form 10-Q, the
following is a summary of the principal risks associated with an investment in Units in the Trust. 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. The Trusts monthly distributions are highly dependent upon the prices realized from the sale
of gas and, to a lesser extent, oil. Oil and gas prices can fluctuate widely on a month-to-month
basis in response to a variety of factors that are beyond the control of the Trust and BROG.
Factors that contribute to price fluctuation include, among others:  
    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. 7




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Moreover, government regulations, such as regulation of natural gas transportation and price
controls, can affect product prices in the long term. Lower oil and gas prices may reduce the amount of oil and gas that is economic to produce and
reduce royalty income paid to the Trust. The volatility of energy prices reduces the
predictability of future cash distributions to Unit Holders. Increased costs of production and development will result in decreased Trust distributions. Production and development costs attributable to the Underlying Properties are deducted in the
calculation of the Trusts share of net proceeds. Accordingly, higher or lower production and
development costs, without concurrent increases in revenues, directly decrease or increase the
amount received by the Trust for the Royalty. If development and production costs of the Underlying Properties exceed the proceeds of
production from the Underlying Properties, the Trust will not receive net proceeds for the
Underlying Properties until future proceeds from production exceed the total of the excess costs.
Development activities may not generate sufficient additional revenue to repay the costs, however,
the Trust is not obligated to repay the excess costs except through future production. 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. The value of the Units of the Trust depends upon, among other things, the amount of reserves
attributable to the Royalty and the estimated future value of the reserves. Estimating reserves is
inherently uncertain. Ultimately, actual production, revenues and expenditures for the Underlying
Properties will vary from estimates and those variations could be material. Petroleum engineers
consider many factors and make assumptions in estimating reserves. Those factors and assumptions
include:  
    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. Changes in these assumptions can materially change reserve estimates. The reserve data included
herein are estimates only and are subject to many uncertainties. Actual quantities of oil and
natural gas may differ considerably from the amounts set forth herein. In addition, different
reserve engineers may make different estimates of reserve quantities and cash flows based upon the
same available data. The operators of the Underlying Properties are subject to extensive governmental regulation. Oil and gas operations have been, and in the future will be, affected by federal, state and
local laws and regulations and other political developments, such as price or gathering rate
controls and environmental protection regulations. 8




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Operating risks for BROG and other operators of the Underlying Properties can adversely affect
Trust distributions. Royalty income payable to the Trust is derived from the production and sale of oil and gas,
which operations are subject to risk inherent in such activities, such as blowouts, cratering,
explosions, uncontrollable flows of oil, gas or well fluids, fires, pollution and other
environmental risks and litigation concerning routine and extraordinary business activities and
events. These risks could result in substantial losses which are deducted in calculating the net
proceeds paid to the Trust due to injury and loss of life, severe damage to and destruction of
property and equipment, pollution and other environmental damage and suspension of operations. None of the Trustee, the Trust nor the Unit Holders control the operation or development of
the Underlying Properties. Neither the Trustee nor the Unit Holders can influence or control the operation or future
development of the Underlying Properties. The Underlying Properties are owned by BROG and BROG
operates the majority of such properties and handles the calculation of the net proceeds
attributable to the Royalty and the payment of Royalty income to the Trust. The Royalty can be sold and the Trust can be terminated in certain circumstances. The Trust will be terminated and the Trustee must sell the Royalty if holders of at least 75%
of the Units approve the sale or vote to terminate the Trust, or if the Trusts gross revenue for
each of two successive years is less than $1,000,000 per year. Following any such termination and
liquidation, the net proceeds of any sale will be distributed to the Unit Holders and Unit Holders
will receive no further distributions from the Trust. We cannot assure you that any such sale will
be on terms acceptable to all Unit Holders. Mineral properties are depleting assets and, if BROG or other operators of the Underlying
Properties do not perform additional development projects, the properties may deplete faster than
expected. The Royalty income payable to the Trust is derived from the sale of depleting assets.
Accordingly, the portion of the distributions to Unit Holders attributable to depletion may be
considered a return of capital. The reduction in proved reserve quantities is a common measure of
depletion. Future maintenance and development projects on the Underlying Properties will affect
the quantity of proved reserves. The timing and size of these projects will depend on the market
prices of natural gas. If BROG does not implement additional maintenance and development projects,
the future rate of production decline of proved reserves may be higher than the rate currently
expected by the Trust. Unit Holders have limited voting rights. Voting rights as a Unit Holder are more limited than those of stockholders of most public
corporations. For example, there is no requirement for annual meetings of Unit Holders or for an
annual or other periodic re-election of the Trustee. Unlike corporations which are generally
governed by boards of directors elected by their equity holders, the Trust is administered by a
corporate Trustee in accordance with the Indenture and other organizational documents. The Trustee
has extremely limited discretion in its administration of the Trust. 9




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Business Overview The Trust is an express trust created under the laws of the state of Texas by the San Juan
Basin Royalty Trust Indenture (the Original Indenture) entered into on November 3, 1980, between
Southland Royalty Company (Southland Royalty) and The Fort Worth National Bank. Effective as of
September 30, 2002, the Original Indenture was amended and restated (the Original Indenture, as
amended and restated, the Indenture). The Trustee of the Trust is TexasBank. On October 23, 1980, the stockholders of Southland Royalty approved and authorized that
companys conveyance of a 75% 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 (the Royalty) carved out of that companys oil
and gas leasehold and royalty interests (the Underlying Properties) in properties located in the
San Juan Basin of northwestern New Mexico. Pursuant to the Net Overriding Royalty Conveyance (the
Conveyance) the Royalty was transferred to the Trust on November 3, 1980, effect as to production
from and after November 1, 1980 at 7:00 A.M. The Royalty constitutes the principal asset of the Trust and the beneficial interests in the
Trust 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. Holders of Units are referred to herein as Unit Holders.
Subsequent to the Conveyance of the Royalty, through a series of assignments and mergers, Southland
Royaltys successor became BROG. 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. Three Months Ended March 31, 2005 and 2004 The Trust received royalty income of $39,242,287 and interest income of $28,437 during the
first quarter of 2005. There was no change in cash reserves. After deducting administrative
expenses of $534,508, distributable income for the quarter was $38,736,216 ($.831092 per Unit). In
the first quarter of 2004, royalty income was $21,196,352, interest income was $8,692, there was no
change in cash reserves, administrative expenses were $513,163 and distributable income was
$20,691,881 ($.443948 per Unit). Based on 46,608,796 Units outstanding, the per Unit distributions
during the first quarter of 2005 were as follows: January
    
    $
    .295960February
    
    
    .236512March
    
    
    .298620Quarter Total
    
    $
    .831092
 The royalty income distributed in the first quarter of 2005 was higher than that distributed
in the first quarter of 2004, primarily due to an increase in the average gas price from $4.17 per
Mcf for the first quarter of 2004 to $6.01 per Mcf for the first quarter of 2005. In addition, in
March 2005, BROG included an aggregate of $833,851 in calculating the Trusts March 2005 royalty
payment. This represented the Trusts 75% interest on late payment of gross proceeds and settlement
of certain other audit exceptions. Interest earnings for the quarter ended March 31, 2005, as
compared to the quarter ended March 31, 2004, were higher, primarily due to an increase in funds
available for investment 10




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pending distribution as well as an increase in interest rates. Administrative expenses were
higher primarily as a result of differences in timing in the receipt and payment of these expenses,
but also as a result of complying with the new internal control over financial reporting and other
requirements of the Sarbanes-Oxley Act of 2002. BROG has informed the Trustee that the New Mexico Oil and Gas Proceeds Withholding Tax Act
(the Withholding Tax Act) requires remitters who pay certain oil and gas proceeds from production
on New Mexico properties on or after October 1, 2003, to withhold income taxes from such proceeds
in the case of certain nonresident recipients. The Trustee, on advice of counsel, has observed
that net profits interests, such as the Royalty, and other types of interests, the extent of
which cannot be determined with respect to a specific share of the oil and gas production, are
excluded from the withholding requirements of the Withholding Tax Act. Unit Holders are reminded
to consult with their tax advisors regarding the applicability of New Mexico income tax to
distributions received from the Trust by a Unit Holder. The capital costs attributable to the Underlying Properties for the first quarter of 2005 were
reported by BROG as approximately $5.94 million. BROGs capital expenditure budget for the
Underlying Properties for 2005 is estimated at $17 million of which approximately $659,000 has been
spent; however, BROG reports that based on its actual capital requirements, its mix of projects and
swings in the price of natural gas, the actual capital expenditures for 2005 could range from $15
million to $25 million. Capital expenditures were approximately $9.45 million for the first
quarter of 2004. In 2004, approximately $22.3 million in capital expenditures were deducted in
calculating Royalty income. In February 2005, BROG informed the Trustee that for 2005 it
anticipates 401 projects, including the drilling of 71 new wells to be operated by BROG and 31
wells to be operated by third parties. Of the new BROG operated wells, 19 are projected to be
conventional wells completed in the Pictured Cliffs, Mesaverde and/or Dakota formations, and the
remaining 52 are projected as coal seam wells completed in the Fruitland Coal formation. A total
of 21 of the wells operated by third parties are projected to be conventional wells and the
remaining ten are projected to be coal seam wells. BROG projects approximately $12 million to be
spent on the new wells, and $5 million is to be expended in working over existing wells and in the
maintenance and improvement of production facilities. BROG has announced that the budget for 2005
reflects the commencement of a shift toward increased development of conventional gas and a winding
down of its program for infill drilling in the Fruitland Coal formation. BROG indicates its budget for 2005 reflects continued, significant development of conventional
formations, including infill drilling to the Mesaverde and Dakota formations, development of the
Fruitland Coal formation and multiple formation completions. A majority of the new wells for 2005
are projected to be drilled on certain of the Underlying Properties in which the fractional working
interest included in the Underlying Properties is relatively low, but many of the recompletions and
restimulations are scheduled on other properties included in the Underlying Properties in which
such working interest is relatively high. BROG has informed the Trustee that lease operating expenses and property taxes were $4,676,449
and $156,178, respectively, for the first quarter of 2005, as compared to $3,998,055 and $126,800,
respectively, for the first quarter of 2004. BROG has reported to the Trustee that during the first quarter of 2005, three gross (0.12 net)
coal seam miscellaneous projects, one gross (0.87 net) coal seam well and one gross (0.002 net)
payadd were completed on the Underlying Properties. Two gross (0.08 net) coal seam miscellaneous projects, 38 gross (5.19 net) coal seam wells,
three gross (1.03 net) coal seam recompletions, 65 gross (6.42 net) conventional wells, 11 gross
(1.74 net) 11




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payadds, one gross (0.75 net) recompletion, and four gross (2.24 net) restimulations were in
progress at March 31, 2005. There were five gross (0.17 net) coal seam wells, one gross (0.82 net) coal seam recompletion,
ten gross (6.33 net) conventional wells, three gross (0.007 net) payadds, one gross (0.44 net)
recompletion, and four gross (3.37 net) restimulations completed on the Underlying Properties as of
March 31, 2004. Three gross (0.12 net) coal seam miscellaneous projects, 78 gross (11.97 net) coal
seam wells, ten gross (0.27 net) conventional wells, five gross (1.77 net) payadds, eight gross
(5.86 net) recompletions, and 12 gross (8.06 net) restimulations were in progress at March 31,
2004. Gross acres or wells, for purposes of this discussion, means the entire ownership interest
of all parties in such properties, and BROGs interest therein is referred to as the net acres or
wells. A payadd is the completion of an additional production interval in an existing completed
zone in a well. Royalty income for the quarter ended March 31, 2005, is associated with actual gas and oil
production during November 2004 through January 2005 from the Underlying Properties. Gas and oil
sales from the Underlying Properties for the quarters ended March 31, 2005 and 2004 were as
follows: 2005
    
    
    2004Gas:Total sales (Mcf)
    
    
    11,362,316
    
    
    
    11,029,233Mcf per day
    
    
    123,503
    
    
    
    119,883Average price (per Mcf)
    
    $
    6.01
    
    
    $
    4.17Oil:Total sales (Bbls)
    
    
    18,589
    
    
    
    14,855Bbls per day
    
    
    202
    
    
    
    161Average price (per Bbl)
    
    $
    42.89
    
    
    $
    28.06
 Gas and oil sales attributable to the Royalty for the quarters ended March 31, 2005 and
2004 were as follows: Gas sales (Mcf)
    
    
    7,033,761
    
    
    
    5,505,696Oil sales (Bbls)
    
    
    11,541
    
    
    
    7,327
 Sales volumes attributable to the Royalty are determined by dividing the net profits
received by the Trust and attributable to oil and gas, respectively, by the prices received for
sales volumes from the Underlying Properties, taking into consideration production taxes
attributable to the Underlying Properties. Since the oil and gas sales attributable to the Royalty
are based on an allocation formula that is dependent on such factors as price and cost, including
capital expenditures, the aggregate production volumes from the Underlying Properties may not
provide a meaningful comparison to volumes attributable to the Royalty. During the first quarter of 2005, average gas prices were $1.84 higher than the average prices
reported during the first quarter of 2004. The average price per barrel of oil during the first
quarter of 2005 was $14.83 per barrel higher than that received for the first quarter of 2004 due
to increases in oil prices in world markets generally, including the posted prices applicable to
oil sales attributable to the Royalty. BROG entered into two contracts for the sale of all volumes of gas produced from the
Underlying Properties. These contracts provide for (i) the sale of such gas to Duke Energy and
Marketing, L.L.C. and PNM Gas Services, respectively, (ii) the delivery of such gas at various
delivery points through March 31, 2005, and from year-to-year thereafter until terminated by either
party on twelve months notice, and 12




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(iii) the sale of such gas at prices which fluctuate in accordance with published indices for
gas sold in the San Juan Basin of New Mexico. Effective January 1, 2004, the rights and
obligations of Duke Energy and Marketing L.L.C. were assumed by ConocoPhillips Company
(ConocoPhillips) pursuant to an Assignment and Novation Agreement. By correspondence dated March
25, 2004, BROG notified ConocoPhillips of BROGs election to terminate such contract as of March
31, 2005. BROG then prepared a form of request for proposal and circulated it to a number of
potential purchasers, including ConocoPhillips, inviting them to bid for the purchase of the gas
currently sold under the contract expiring March 31, 2005. Effective as of April 1, 2005, BROG
entered into two new contracts for the sale of all volumes of gas produced from the Underlying
Properties and formerly sold to ConocoPhillips. These new contracts provide for (i) the sale of
such gas to ChevronTexaco Natural Gas, a division of Chevron U.S.A. Inc. and Coral Energy
Resources, L.P., respectively, (ii) the delivery of such gas at various delivery points through
March 31, 2007, and from year-to-year thereafter until terminated by either party on twelve months
notice, and (iii) the sale of such gas at prices which fluctuate in accordance with the published
indices for gas sold in the San Juan Basin of New Mexico. With respect to BROGs contract with PNM
Gas Services, BROG and PNM Gas Services have entered into a letter agreement dated January 31,
2005, pursuant to which the parties waive the right to terminate the underlying contract as of
March 31, 2006, so that the term of that contract will continue until at least March 31, 2007, and
from year-to-year thereafter until terminated by either party upon twelve months notice to the
other. Unit Holders are referred to Note 6 of the Notes to Financial Statements in the Trusts
2004 Annual Report for further information concerning the marketing of gas produced from the
Underlying Properties. Confidentiality agreements with purchasers of gas produced from the Underlying Properties
prohibit public disclosure of certain terms and conditions of gas sales contracts with those
entities, including specific pricing terms and gas receipt points. Such disclosure could compromise
the ability to compete effectively in the marketplace for the sale of gas produced from the
Underlying Properties. 13




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##### Table of Contents



Calculation of Royalty Income Royalty income received by the Trust for the three months ended March 31, 2005 and 2004,
respectively, was computed as shown in the following table: 2005
    
    
    2004Gross proceeds of sales from the Underlying Properties:Gas proceeds
    
    $
    68,336,883
    
    
    $
    46,020,762Oil proceeds
    
    
    797,200
    
    
    
    416,76469,134,083
    
    
    
    46,437,526Other
    
    
    1,096,102
    (1)
    
    
    Total
    
    
    70,230,185
    
    
    
    46,437,526Less production costs:Severance tax  Gas
    
    
    7,050,782
    
    
    
    4,552,824Severance tax  Oil
    
    
    86,061
    
    
    
    44,260Lease operating expense and property tax
    
    
    4,832,627
    (1)
    
    
    4,124,855Other
    
    
    
    
    
    
    Capital expenditures
    
    
    5,937,666
    
    
    
    9,453,785Total
    
    
    17,907,136
    
    
    
    18,175,724Less excess production and interest from prior year
    
    
    
    
    
    
    Net profits
    
    
    52,323,049
    
    
    
    28,261,802Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    39,242,287
    
    
    $
    21,196,352
    Contractual Obligations Under the Indenture governing the Trust, the Trustee is entitled to an administrative fee for
its administrative services and the preparation of quarterly and annual statements 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. As of January 1, 2003, the administrative fee due under
items (i) and (ii) above will not be less than $36,000 per year (as adjusted annually to reflect
the increase (if any) in the Producers Price Index as published by the U.S. Department of Labor,
Bureau of Labor Statistics). Effects of Securities Regulation As a publicly-traded trust listed on the New York Stock Exchange (the NYSE), the Trust is
and will continue to be subject to extensive regulation under, among others, the Securities Act of
1933, the Securities Exchange Act of 1934 (which contains many of the provisions of the
Sarbanes-Oxley Act of 2002) and the rules and regulations of the NYSE. Issuers failing to comply
with such authorities risk 14




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serious consequences, including criminal as well as civil and administrative penalties. In
most instances, these laws, rules and regulations do not specifically address their applicability
to publicly-traded trusts, such as the Trust. In particular, the Sarbanes-Oxley Act of 2002
provides for the adoption by the Securities and Exchange Commission (the Commission) and NYSE of
certain rules and regulations that may be impossible for the Trust to literally satisfy because of
its nature as a pass-through trust. It is the Trustees intention to follow the Commissions and
NYSEs rulemaking closely, attempt to comply with such rules and regulations and, where
appropriate, request relief from these rules and regulations. However, if the Trust is unable to
comply with such rules and regulations or to obtain appropriate relief, the Trust may be required
to expend as yet unknown but potentially material costs to amend the Indenture that governs the
Trust to allow for compliance with such rules and regulations. To date, the rules implementing the
Sarbanes-Oxley Act of 2002 have generally made appropriate accommodation for passive entities such
as the Trust. Critical Accounting Policies In accordance with the Commissions staff accounting bulletins and consistent with other
royalty trusts, the financial statements of the Trust are prepared on the following basis:  
    Royalty income recorded for a month is the amount computed and paid pursuant to
the Conveyance by BROG to the Trustee for the Trust.
    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 production costs applicable to the Underlying Properties over gross
proceeds from such properties must be recovered from future net profits before
Royalty income is again paid to the Trust. The financial statements of the Trust differ from financial statements prepared in accordance
with 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. 
 Item 3. Quantitative and Qualitative Disclosures About Market Risk. The Trust invests in no derivative financial instruments, and has no foreign operations or
long-term debt instruments. The Trust is a passive entity and is prohibited from engaging in
borrowing transactions, other than the Trusts ability to borrow money periodically as necessary to
pay expenses, liabilities and obligations of the Trust that cannot be paid out of cash held by the
Trust. The amount of any such borrowings is unlikely to be material to the Trust. The Trust
periodically holds short-term investments acquired with funds held by the Trust pending
distribution to Unit Holders and funds held in reserve for the payment of Trust expenses and
liabilities. Because of the short-term nature of these borrowings and investments and certain
limitations upon the types of such investments which may be held by the Trust, the Trustee believes
that the Trust is not subject to any material interest rate risk. The Trust does not engage in
transactions in foreign currencies which could expose the Trust or Unit Holders to any foreign
currency related market risk. The Trust does not market the gas, oil and/or natural gas liquids
from the Underlying Properties. BROG is responsible for such marketing. 15




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##### Table of Contents



Item 4. Controls and Procedures. The Trust maintains a system of disclosure controls and procedures that is designed to ensure
that information required to be disclosed in the Trusts filings under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported, within the time periods specified in the
Commissions rules and forms. Disclosure controls and procedures include controls and procedures
designed to ensure that information required to be disclosed by the Trust is accumulated and
communicated by BROG to the Trustee and its employees who participate in the preparation of the
Trusts periodic reports to allow timely decisions regarding disclosure. Due to the pass-through
nature of the Trust, BROG provides much of the information disclosed in this Form 10-Q and the
other periodic reports filed by the Trust with the Commission. The Indenture does not require BROG to update or provide information to the Trust. Under the
Conveyance transferring the Royalty to the Trust, BROG is obligated to provide the Trust with
certain information concerning calculations of net proceeds owed to the Trust, among other
information. Pursuant to the settlement of litigation in 1996 between the Trust and BROG, BROG
agreed to new, more formal financial reporting and audit procedures as compared to those provided
in the Conveyance. The Trustee receives periodic updates from BROG regarding activities related to the Trust.
Accordingly, the Trusts ability to timely report certain information required to be disclosed in
the Trusts periodic reports is dependent on BROGs timely delivery of such information to the
Trust. In order to help ensure the accuracy and completeness of the information required to be
disclosed in the Trusts periodic reports, the Trust employs independent public accountants, joint
interest auditors, marketing consultants, attorneys and petroleum engineers. These outside
professionals advise the Trustee in its review and compilation of this information for inclusion in
this Form 10-Q and the other periodic reports provided by the Trust to the Commission. The Trustee has evaluated the Trusts disclosure controls and procedures as of March 31, 2005,
and has concluded that such disclosure controls and procedures are effective at the reasonable
assurance level to ensure that material information related to the Trust is gathered on a timely
basis to be included in the Trusts periodic reports. In reaching its conclusion, the Trustee
considered the Trusts dependence on BROG to deliver timely and accurate information to the Trust.
The Trustee has not reviewed the Trusts disclosure controls and procedures in concert with
management, a board of directors or an independent audit committee. The Trust does not have, nor
does the Indenture provide for, officers, a board of directors or an independent audit committee. During the quarter ended March 31, 2005, there were no changes in the Trusts internal control
over financial reporting (as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934) that
materially affected, or are reasonably likely to materially affect, the Trusts internal control
over financial reporting. The Trustee has not evaluated the Trusts internal control over
financial reporting in concert with management, a board of directors or an independent audit
committee. The Trust does not have, nor does the Indenture provide for, officers, a board of
directors or an independent audit committee. 
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings. As discussed above under Part I, Item 4 Controls and Procedures, due to the pass-through
nature of the Trust, BROG provides much of the information disclosed in this Form 10-Q and the
other periodic reports filed by the Trust with the Commission. Although the Trustee receives
periodic updates 16




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##### Table of Contents



from BROG regarding activities which may relate to the Trust, the Trusts ability to timely
report certain information required to be disclosed in the Trusts periodic reports is dependent on
BROGs timely delivery of the information to the Trust. The Trust is not named as a party, nor are its assets subject, to any legal proceedings,
however, BROG is involved in various legal proceedings, the outcome of which may impact the Trust.
Should certain legal proceedings to which BROG is a party be decided in a manner adverse to BROG,
the amount of Royalty income received by the Trust could materially decrease. The Trust has not
received from BROG any estimate of the amount of any potential loss in such proceedings, or the
portion of any such potential loss that might be allocated to the Royalty. 
 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 of 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 May 10, 2005, by Lee Ann
Anderson, Vice President and Trust Officer of TexasBank, the Trustee for the Trust.**32
    
    
    Certification required by Rule 13a-14(b), dated May 10, 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. 17




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. TEXASBANK, AS TRUSTEE FOR
THE SAN JUAN BASIN ROYALTY TRUSTBy:
    
    /s/ Lee Ann AndersonLee Ann AndersonVice President and Trust Officer
 Date: May 10, 2005 (The Trust has no directors or executive officers.)




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INDEX TO EXHIBITS ExhibitNumber
    
    Description(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 of 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 with the Commission for the quarter
ended September 30, 2002, is incorporated herein by reference.*31
    
    Certification required by Rule 13a-14(a), dated May 10, 2005, by
Lee Ann Anderson, Vice President and Trust Officer of TexasBank,
the Trustee for the Trust.**32
    
    Certification required by Rule 13a-14(b), dated May 10, 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.