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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
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   o
   SAN JUAN BASIN ROYALTY TRUST
  Texas
(State or other jurisdiction
of incorporation or organization)
    
    75-6279898
(I.R.S. Employer
Identification No.)
 
 
 
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TABLE OF CONTENTS  PART I FINANCIAL INFORMATIONItem 1. Financial Statements.Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures About Market Risk.Item 4. Controls and Procedures.PART II OTHER INFORMATIONItem 1. Legal Proceedings.Item 6. Exhibits.SIGNATURESINDEX TO EXHIBITSCertification Required by Rule 13a-14(a) by the Vice President and Trust OfficerCertification Required by Rule 13a-14(b) by the Vice President and Trust Officer    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
 March 31,
    
    
    December 31,2006
    
    
    2005(Unaudited)ASSETSCash and short-term investments
    
    $
    15,551,034
    
    
    $
    19,173,162Net overriding royalty interest in producing
oil and gas properties (net of accumulated
amortization of $109,997,591 and $109,394,034
at March 31, 2006 and December 31, 2005, respectively)
    
    
    23,277,937
    
    
    
    23,881,494$
    38,828,971
    
    
    $
    43,054,656LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders
    
    $
    15,436,176
    
    
    $
    19,058,304Cash reserves
    
    
    114,858
    
    
    
    114,858Trust corpus - 46,608,796 Units of beneficial
interest authorized and outstanding
    
    
    23,277,937
    
    
    
    23,881,494$
    38,828,971
    
    
    $
    43,054,656
 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
 Three Months EndedMarch 31,2006
    
    
    2005Royalty income
    
    $
    50,875,009
    
    
    $
    39,242,287Interest income
    
    
    97,737
    
    
    
    28,43750,972,746
    
    
    
    39,270,724General and administrative expenditures
    
    
    482,550
    
    
    
    534,508Distributable income
    
    $
    50,490,196
    
    
    $
    38,736,216Distributable income per Unit (46,608,796 Units)
    
    $
    1.083276
    
    
    $
    0.831092
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SAN JUAN BASIN ROYALTY TRUST
 CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
 Three Months EndedMarch 31,2006
    
    
    2005Trust corpus, beginning of period
    
    $
    23,881,494
    
    
    $
    26,674,821Amortization of net overriding royalty interest
    
    
    (603,557
    )
    
    
    (761,913
    )Distributable income
    
    
    50,490,196
    
    
    
    38,736,216Distributions declared
    
    
    (50,490,196
    )
    
    
    (38,736,216
    )Total corpus, end of period
    
    $
    23,277,937
    
    
    $
    25,912,908
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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 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.
  2. FEDERAL INCOME TAXES
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3. CONTINGENCIES
  4. SETTLEMENTS AND LITIGATION
    San Juan Basin Royalty Trust vs. Burlington
Resources Oil & Gas Company LP Burlington Resources Oil & Gas Company LP vs. San Juan Basin Royalty Trust,
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Item 2. Trustees Discussion and Analysis of Financial Condition and Results of Operations.
 Forward-Looking Information
  Business Overview
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Three Months Ended March 31, 2006 and 2005
  January.
    
    $
    .414455February.
    
    
    .337635March.
    
    
    .331186Quarter Total
    
    $
    1.083276
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2006
    
    
    2005Gas:Total sales (Mcf)
    
    
    10,830,512
    
    
    
    11,362,316Mcf per day
    
    
    117,723
    
    
    
    123,503Average price (per Mcf)
    
    $
    8.44
    
    
    $
    6.01Oil:Total sales (Bbls)
    
    
    18,598
    
    
    
    18,589
 2006
    
    
    2005Bbls per day
    
    
    202
    
    
    
    202Average price (per Bbl)
    
    $
    56.54
    
    
    $
    42.89
  2006
    
    
    2005Gas sales (Mcf)
    
    
    6,532,486
    
    
    
    7,033,761Oil sales
(Bbls)
    
    
    11,153
    
    
    
    11,541
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Calculation of Royalty Income
  2006
    
    
    2005Gross proceeds of sales from the Underlying Properties:Gas proceeds
    
    $
    91,455,578
    
    
    $
    68,336,883Oil proceeds
    
    
    1,051,494
    
    
    
    797,20092,507,072
    
    
    
    69,134,083Other
    
    
    525,230
    (1)
    
    
    1,096,102
    (2)Total
    
    
    93,032,302
    
    
    
    70,230,185Less production costs:Severance tax  Gas
    
    
    8,778,228
    
    
    
    7,050,782Severance tax  Oil
    
    
    104,921
    
    
    
    86,061Lease operating expense and property tax
    
    
    5,157,521
    
    
    
    4,832,627
    (2)Other
    
    
    
    
    
    
    Capital expenditures
    
    
    11,158,287
    
    
    
    5,937,666Total
    
    
    25,198,957
    
    
    
    17,907,136Less excess production and interest from prior year
    
    
    
    
    
    
    Net profits
    
    
    67,833,345
    
    
    
    52,323,049Net overriding royalty interest
    
    
    75
    %
    
    
    75
    %Royalty income
    
    $
    50,875,009
    
    
    $
    39,242,287
 
 (1)
    
    In February 2006, as part of the ongoing negotiations between the Trust and BROG, $393,923 was
included in BROGs distribution to the Trust in payment of interest due on late payment of gross
proceeds.(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 BROGs distribution to the
Trust in payment of interest on late payments of gross 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 . Contractual Obligations
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Effects of Securities Regulation
  Critical Accounting Policies
  
    
    Royalty income recorded for a month is the amount computed and paid 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 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.
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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Item 4. Controls and Procedures.
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PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  San Juan Basin Royalty Trust vs. Burlington Resources
Oil & Gas Company LP Burlington
Resources Oil & Gas Company LP vs. San Juan Basin Royalty Trust,
  
 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.*
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(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 5, 2006, by Lee Ann
Anderson, Vice President and Trust Officer of Compass Bank, the Trustee for the
Trust.**32
    
    
    Certification required by Rule 13a-14(b), dated May 5, 2006, by Lee Ann
Anderson, Vice President and 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. 16




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SIGNATURES
  COMPASS BANK, 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
    
    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 5, 2006, by
Lee Ann Anderson, Vice President and Trust Officer of Compass
Bank, the Trustee for the Trust.**32
    
    Certification required by Rule 13a-14(b), dated May 5, 2006, by
Lee Ann Anderson, Vice President and 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.