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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 September 30, 2007
 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 o
  o þ




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TABLE OF CONTENTS  PART 1 FINANCIAL INFORMATIONItem 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 II OTHER INFORMATIONItem 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 1
FINANCIAL INFORMATION
 
 Item 1. Financial Statements.




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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCash and short-term investments
    
    $
    11,324,437
    
    
    $
    4,657,886Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $112,876,957 and
$111,452,138 at September 30, 2007 and
December 31, 2006, respectively)
    
    
    20,398,572
    
    
    
    21,823,390$
    31,723,009
    
    
    $
    26,481,276LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    11,209,579
    
    
    $
    4,543,028Cash reserves
    
    
    114,858
    
    
    
    114,858Trust corpus  46,608,796 Units of beneficial
interest authorized and outstanding
    
    
    20,398,572
    
    
    
    21,823,390$
    31,723,009
    
    
    $
    26,481,276
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Royalty income
    
    $
    37,086,982
    
    
    $
    30,779,508
    
    
    $
    87,324,045
    
    
    $
    109,792,831Interest income
    
    
    561,866
    
    
    
    601,349
    
    
    
    1,275,679
    
    
    
    1,136,03237,648,848
    
    
    
    31,380,857
    
    
    
    88,599,724
    
    
    
    110,928,863General and administrative
expenditures
    
    
    263,629
    
    
    
    293,291
    
    
    
    1,411,072
    
    
    
    1,418,453Distributable income
    
    $
    37,385,219
    
    
    $
    31,087,566
    
    
    $
    87,188,652
    
    
    $
    109,510,410Distributable income per Unit
(46,608,796 Units)
    
    $
    .802107
    
    
    $
    .666989
    
    
    $
    1.870650
    
    
    $
    2.349564
  3




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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    

September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Trust corpus, beginning of period
    
    $
    21,004,120
    
    
    $
    22,803,487
    
    
    $
    21,823,390
    
    
    $
    23,881,494Amortization of net overriding
royalty interest
    
    
    (605,548
    )
    
    
    (509,625
    )
    
    
    (1,424,818
    )
    
    
    (1,587,632
    )Distributable income
    
    
    37,385,219
    
    
    
    31,087,566
    
    
    
    87,188,652
    
    
    
    109,510,410Distributions declared
    
    
    (37,385,219
    )
    
    
    (31,087,566
    )
    
    
    (87,188,652
    )
    
    
    (109,510,410
    )Trust corpus, end of period
    
    $
    20,398,572
    
    
    $
    22,293,862
    
    
    $
    20,398,572
    
    
    $
    22,293,862
  4




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SAN JUAN BASIN ROYALTY TRUST
 NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
 1.
    
    BASIS OF ACCOUNTING
  
    
    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.
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2.
    
    FEDERAL INCOME TAXES
     3.
    
    CONTINGENCIES
  4.
    
    SETTLEMENTS AND LITIGATION
  6




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San Juan Basin Royalty Trust vs. Burlington
Resources Oil & Gas Company LP
 7




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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
  Business Overview
    8




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Three Months Ended September 30, 2007 and 2006
  July
    
    $
    .305275August
    
    
    .256328September
    
    
    .240504Quarter Total
    
    $
    .802107
  9




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10




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Three Months EndedSeptember 30,2007
    
    2006Gas:Total sales (Mcf)
    
    
    9,954,324
    
    
    
    10,314,842Mcf per day
    
    
    108,199
    
    
    
    112,118Average price (per Mcf)
    
    $
    6.55
    
    
    $
    5.79Oil:Total sales (Bbls)
    
    
    16,936
    
    
    
    20,635Bbls per day
    
    
    184
    
    
    
    224Average price (per Bbl)
    
    $
    64.16
    
    
    $
    66.65
  Three Months EndedSeptember 30,2007
    
    2006Gas sales (Mcf)
    
    
    6,117,289
    
    
    
    5,585,866Oil sales (Bbls)
    
    
    10,379
    
    
    
    11,206
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Nine Months Ended September 30, 2007 and 2006
   12




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Nine Months EndedSeptember 30,2007
    
    2006Gas:Total sales (Mcf)
    
    
    27,533,964
    
    
    
    31,118,008Mcf per day
    
    
    100,857
    
    
    
    113,985Average price (per Mcf)
    
    $
    6.33
    
    
    $
    6.77Oil:Total Sales (Bbls)
    
    
    51,172
    
    
    
    59,446Bbls per day
    
    
    187
    
    
    
    218Average price (per Bbl)
    
    $
    58.87
    
    
    $
    61.42
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Nine Months EndedSeptember 30,2007
    
    2006Gas sales (Mcf)
    
    
    14,887,130
    
    
    
    17,318,681Oil sales (Bbls)
    
    
    27,074
    
    
    
    32,908
  14




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Calculation of Royalty Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Gross proceeds of sales from
the Underlying Properties:Gas proceeds
    
    $
    65,197,892
    
    
    $
    59,729,249
    
    
    $
    174,231,856
    
    
    $
    210,729,922Oil proceeds
    
    
    1,086,618
    
    
    
    1,375,288
    
    
    
    3,012,266
    
    
    
    3,651,097Other
    
    
    
    
    
    
    1,325,826
    (1)
    
    
    45,066
    (2)
    
    
    1,325,826
    (1)Total
    
    
    66,284,510
    
    
    
    62,430,363
    
    
    
    177,289,188
    
    
    
    215,706,845Less production costs:Severance tax  gas
    
    
    6,085,096
    
    
    
    5,803,814
    
    
    
    16,615,175
    
    
    
    20,333,258Severance tax  oil
    
    
    109,607
    
    
    
    139,490
    
    
    
    291,005
    
    
    
    366,035Lease operating expense and
property tax
    
    
    7,438,787
    
    
    
    6,800,398
    
    
    
    21,602,463
    
    
    
    17,815,402Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,968Capital expenditures
    
    
    3,201,710
    
    
    
    8,647,317
    
    
    
    22,348,485
    
    
    
    30,758,741Total
    
    
    16,835,200
    
    
    
    21,391,019
    
    
    
    60,857,128
    
    
    
    69,316,404Less excess production costs
and interest from prior year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net profits
    
    
    49,449,310
    
    
    
    41,039,344
    
    
    
    116,432,060
    
    
    
    146,390,441Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    37,086,982
    
    
    $
    30,779,508
    
    
    $
    87,324,045
    
    
    $
    109,792,831
 
 (1)
    
    BROGs distribution to the Trust for July 2006 included $1,534,182 representing a portion of
the Arbitration Award referred to in Note 4 of the Notes to Condensed Financial Statements,
plus accrued interest. Of this amount, $1,325,826 (the equivalent of $994,370 grossed up to
account for the Trusts 75% net overriding royalty interest) was included in calculating the
net proceeds paid to the Trust, and the accrued interest thereon was $539,812.(2)
    
    In May 2007, as part of the ongoing negotiations between the Trust and BROG concerning a
number of revenue and expense audit issues, $45,066 was allocated to the Trust as additional
revenue. Contractual Obligations
  15




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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.
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
    
    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.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4. Controls and Procedures.
   17




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PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  San Juan Basin Royalty Trust vs. Burlington Resources
Oil & Gas Company LP
 18




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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, 2006, 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
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Commission for the quarter ended September 30, 2002, is incorporated herein by
reference.*31
    
    Certification required by Rule 13a-14(a), dated November 9, 2007, by Lee Ann
Anderson, Vice President and Senior Trust Officer of Compass Bank, the Trustee of the
Trust.**32
    
    Certification required by Rule 13a-14(b), dated November 9, 2007, by Lee Ann
Anderson, Vice President and Senior Trust Officer of Compass Bank, on behalf of Compass
Bank, 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, Compass Bank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith. 20




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SIGNATURES
  COMPASS BANK, AS TRUSTEE OF THE
SAN JUAN BASIN ROYALTY TRUSTBy:
    /s/ Lee Ann AndersonLee Ann AndersonVice President and Senior 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, 2006, 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 November 9, 2007,
by Lee Ann Anderson, Vice President and Senior Trust Officer of
Compass Bank, the Trustee of the Trust.**32
    
    Certification required by Rule 13a-14(b), dated November 9, 2007
by Lee Ann Anderson, Vice President and Senior Trust Officer of
Compass Bank, on behalf of Compass Bank, 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, Compass Bank, 2525 Ridgmar Boulevard, Suite 100, Fort Worth, Texas 76116.**
    
    Filed herewith.***
    
    Furnished herewith.