##### Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549   FORM 10-Q    ☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
Quarterly Period Ended September 30, 2020 or  ☐
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from  to Commission File No. 001-08032   SAN JUAN BASIN ROYALTY TRUST (Exact name of registrant as specified in the Amended and Restated San Juan Basin Royalty Trust Indenture)    Texas

75-6279898(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.) BBVA USA 2200 Post Oak Blvd, Floor 18 Houston, Texas 77056 (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  ☒    No  ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).    Yes  ☐    No  ☐ Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of large accelerated
filer, accelerated filer, smaller reporting company or emerging growth company in Rule 12b-2 of the Exchange Act. (Check one):   Large accelerated filer

☐

Accelerated filer

☐Non-accelerated filer

☒

Smaller reporting company

☒Emerging growth company

☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended
transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act).    Yes  ☐    No  ☒ Securities registered pursuant to
Section 12(b) of the Act:  Title of each class

TradingSymbol(s)

Name of each exchangeon which
registeredUnits

SJT

New York Stock Exchange Number of Units of beneficial interest outstanding at November 16, 2020: 46,608,796




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##### Table of Contents

Table of Contents  PART I. FINANCIAL INFORMATIONItem 1

Financial Statements


1Item 2

Trustees Discussion and Analysis of Financial Condition and Results of
 Operations


5Item 3

Quantitative and Qualitative Disclosures about Market Risk


11Item 4

Controls and Procedures


12PART II. OTHER INFORMATIONItem 1

Legal Proceedings


12Item 1A

Risk Factors


12Item 2

Unregistered Sales of Equity Securities and Use of Proceeds


12Item 3

Defaults Upon Senior Securities


12Item 4

Mine Safety Disclosures


13Item 5

Other Information


13Item 6

Exhibits


14SIGNATURE  i




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SAN JUAN BASIN ROYALTY TRUST PART I FINANCIAL
INFORMATION  Item 1.
Financial Statements. CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS  September 30,2020(Unaudited)


December 31,2019(Audited)ASSETSCash and short-term investments

$
602,910


$
1,079,421Net overriding royalty interest in producing oil and gas properties (net of accumulated
amortization of $128,103,458 and $127,823,321 at September 30, 2020 and December 31, 2019, respectively)


5,172,070



5,452,207$
5,774,980


$
6,531,628LIABILITIES AND TRUST CORPUSDistribution payable to Unit Holders

$



$
79,421Cash reserves


602,910



1,000,000Trust corpus  46,608,796 Units of beneficial interest authorized and outstanding


5,172,070



5,452,207$
5,774,980


$
6,531,628 CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,2020


2019


2020


2019Royalty income

$



$



$
6,039,129


$
8,957,770Interest income


396



5,633



6,010



23,347Total income


396



5,633



6,045,139



8,981,117General and administrative expenses


(290,344
)


(340,084
)


(1,238,724
)


(1,388,971
)Decrease in cash reserves


289,948



334,451



397,090



419,394Distributable income

$



$



$
5,203,505


$
8,011,540Distributable income per Unit (46,608,796 Units)

$
0.000000


$
0.000000


$
0.111642


$
0.171890 These Condensed Financial Statements should be read in conjunction with the accompanying Notes to Financial Statements included herein.  1




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CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,2020


2019


2020


2019Trust corpus, beginning of period

$
5,172,070


$
5,586,320


$
5,452,207


$
5,844,727Amortization of net overriding royalty interest










(280,137
)


(258,407
)Distributable income










5,203,505



8,011,540Distributions declared










(5,203,505
)


(8,011,540
)Trust corpus, end of period

$
5,172,070


$
5,586,320


$
5,172,070


$
5,586,320Distributions declared (per Unit)

$
0.000000


$
0.000000


$
0.111642


$
0.171890 These Condensed Financial Statements should be read in conjunction with the accompanying Notes to Condensed Financial Statements included herein.  2




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##### Table of Contents

1. Basis of Presentation The preceding (a) condensed statement of assets, liabilities and trust corpus as of December 31, 2019 has been derived from audited
financial statements, and (b) the unaudited interim condensed financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). These condensed financial
statements should be read in conjunction with the financial statements and the notes thereto included in San Juan Basin Royalty Trust (the Trust) Annual Report on Form 10-K for the year ended
December 31, 2019. In the opinion of BBVA USA, the trustee of the Trust (the Trustee), and based upon information provided to the Trust by Hilcorp San Juan L.P. (Hilcorp), the present owner of certain oil and gas
interests originally owned by Southland Royalty Company (the Subject Interests) in properties located in the San Juan Basin of northwestern New Mexico (the Royalty Income), all adjustments, consisting only of normal recurring
adjustments, have been included that are necessary to fairly present the assets, liabilities and trust corpus of the Trust at September 30, 2020, and the distributable income and changes in trust corpus for the three-month and nine-month
periods ended September 30, 2020 and 2019. The distributable income for such interim periods is not necessarily indicative of the distributable income for the full year. The financial statements of the Trust are prepared on the following basis and are not intended to present the financial position and results
of operations of the Trust in conformity with U.S. generally accepted accounting principles (GAAP):  

The net proceeds attributable to the 75% net overriding royalty interest (the Royalty) that burdens
the Subject Interests recorded for a month is the amount computed and paid by Hilcorp to the Trustee for the Trust. Royalty Income consists of the proceeds received by Hilcorp from the sale of production, 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 Hilcorp for any month includes adjustments to proceeds and costs for prior months and affects the Royalty
Income paid to the Trust and the distribution to Unit Holders for that month. See Item 2 Part I of this Quarterly Report on Form 10-Q entitled Gross Proceeds and Severance Tax Estimates for a more
detailed explanation of the estimate and true-up process for distributable income reporting and distributions to Unit Holders.  

Although permitted under the Net Overriding Royalty Conveyance that transferred the Royalty to the Trust (the
Conveyance), Hilcorp has informed the Trust that, for wells operated by Hilcorp, it generally does not intend to accrue lease operating expenses to the Trust.  

Hilcorp has informed the Trust that oil revenue is typically reported to the Trust based on actual volumes and
pricing and that due to timing, Hilcorp reports accrued natural gas revenues to the Trust based on actual production volumes from the meters. Generally, Hilcorp reconciles the natural gas revenue accruals with the plant processing statements the
month following the previously reported financial information.  

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 provides that any excess production costs applicable to the Subject Interests over gross proceeds
from such properties must be recovered from future net proceeds before Royalty Income is again paid to the Trust. The Trust is not obligated to reimburse Hilcorp for any excess production costs if future gross proceeds from the Subject Interests are
insufficient to cover such costs. Gross excess production costs applicable to the Subject Interests were $92,000 as of September 30, 2020, with 75%, or $69,000 (net) allocated 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 liabilities and contingencies that 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 as an expense. Most accounting pronouncements apply
to entities whose financial statements are prepared in accordance with GAAP, directing such entities to accrue or defer revenues and expenses in a period other than when such revenues were received or expenses were paid. Because the Trusts
financial statements are prepared on the modified cash basis, as described above, most accounting pronouncements are not applicable to the Trusts financial statements, including the provisions of ASC 842, Leases. The Trustee determined
that this standard has no impact on the Trusts financial statements. The Trustee has determined that there are no additional
disclosures required based on the Trusts method of accounting. This comprehensive basis of accounting corresponds to the accounting permitted for royalty trusts by the SEC, as specified by Staff Accounting Bulletin Topic 12:E, Financial
Statements of Royalty Trusts.  3




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The Trustee routinely reviews the Trusts royalty interests in oil and natural gas
properties for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment event occurs and it is determined that the carrying value of the Trusts royalty interests may not
be recoverable, an impairment will be recognized as measured by the amount by which the carrying amount of the royalty interests exceeds the fair value of these assets, that would likely be measured by discounting projected cash flows and is charged
directly to trust corpus instead of as an expense. There was no impairment of the Trusts assets as of September 30, 2020. 2. Federal Income
Taxes For federal income tax purposes, the Trust constitutes a fixed investment trust that 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 Trust is a widely held fixed
investment trust (WHFIT) classified as a non-mortgage widely held fixed investment trust (NMWHFIT) for federal income tax purposes. The Trustee is the representative of the Trust that
will provide tax information in accordance with the applicable U.S. Treasury Regulations governing the information reporting requirements of the Trust as a WHFIT and a NMWHFIT. The Royalty constitutes an economic interest in oil and natural gas properties for federal income tax purposes. Unit Holders must
report their share of the production revenues of the Trust as ordinary income from oil and natural 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. Under current federal income tax law, the Trusts
production and sale of natural gas from coal seam wells does not qualify for a tax credit under Section 45K (the Section 45 Tax Credit) of the Internal Revenue Code of 1986, as amended (the Code). Congress has at
various times since 2002 considered energy legislation, including provisions to reinstate the Section 45 Tax Credit in various ways and to various extents, but no legislation that would qualify the Trusts current production for such
credit has been enacted. No prediction can be made as to what future tax legislation affecting Section 45K of the Code may be proposed or enacted or, if enacted, its impact, if any, on the Trust and the Unit Holders. The classification of the Trusts income for purposes of the passive loss rules may be important to a Unit Holder. Royalty income such as
that derived through the Trust will generally be treated as portfolio income that may not be offset or reduced by passive losses. Tax
positions taken by the Trust related to the Trusts pass-through status and state tax positions have been reviewed, and the Trustee is of the opinion that the material tax positions it has taken would more likely than not be sustained by
examination. As of September 30, 2020, the Trusts tax years 2016 and thereafter remain subject to examination. Each Unit
Holder should consult his or her own tax advisor regarding tax compliance matters related to such Unit Holders interest in the Trust. 3.
Commitments and Contingencies Contingencies related to the Subject Interests that are unfavorably resolved would generally be
reflected by the Trust as reductions to future Royalty Income payments to the Trust with corresponding reductions to cash distributions to Unit Holders. See Note 1 Basis of Presentation, for a summary of the terms of the Conveyance with respect to
recovery of costs. The Trust continues to request periodic updates from Hilcorp as to its production and financial expectations with
respect to the Subject Interests due to any effects caused by the ongoing Covid-19 pandemic and the recent fluctuations in oil and gas pricing. Hilcorp has informed the Trust that, given the current natural
gas pricing environment, Hilcorp does not anticipate materially reducing any of the Subject Interests production or taking any of the Subject Interests wells offline; however, both the Trust and Hilcorp continue to monitor the impact
that Covid-19 may have on production, including as it relates to personnel availability in New Mexico and other Subject Interest areas. Hilcorp further informed the Trust that it does not anticipate that Covid-19 will have any material impact on its operation of the Subject Interests or on its payments of Royalty Income to the Trust. However, the impact of the Covid-19
pandemic on Hilcorp and the Subject Interests is still unknown and any such impact could result in actual results being different from Hilcorps expectations. Specifically, the Trust has noted that prices remain low, which may lead to further
reductions from expected negative true-ups for reported estimates from earlier periods in 2020.  4




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##### Table of Contents

4. Settlements and Litigation None. 5. Subsequent Events On October 20, 2020, the Trust reported that Hilcorp had advised the Trust that the August 2020 reporting month included a reimbursement
by the Trust to Hilcorp of $0.5 million, as the remaining portion of the total $2.0 million in Other revenue that was included in the estimated gross proceeds in the December 2017 and January 2018 distribution months. In
addition, the Trustee replenished the Trusts cash reserves during the third quarter by $0.4 million to bring the cash reserve balance back to the previously established amount of $1.0 million.  Item 2.
Trustees Discussion and Analysis of Financial Condition and Results of Operations. Overview The
Trust is an express trust created under the laws of the state of Texas by the San Juan Basin Royalty Trust Indenture entered into on November 1, 1980 between Southland Royalty Company (Southland) and The Fort Worth National Bank
(the Original Indenture). The Original Indenture was amended and restated on September 30, 2002, and further amended and restated on December 12, 2007, which the Trust refers to as the Indenture in this Quarterly
Report on Form 10-Q. Because of a series of mergers and other transactions involving the Trustee of the Trust, the current Trustee of the Trust is BBVA USA, which is a wholly-owned subsidiary of Banco Bilbao
Vizcaya Argentaria, S.A. The Conveyance and the Royalty Pursuant to the Net Overriding Royalty Conveyance (the Conveyance) effective November 1, 1980, Southland conveyed the Royalty
that burdens the Subject Interests in properties located in the San Juan Basin of northwestern New Mexico to the Trust. Subsequent to the Conveyance of the Royalty, through a series of sales, assignments and mergers, Southlands successor
became Hilcorp, which acquired the Subject Interests from Burlington Resources Oil & Gas Company LP (Burlington), an indirect wholly-owned subsidiary of ConocoPhillips, on July 31, 2017. The Royalty constitutes the principal asset of the Trust. The beneficial interest in the Royalty is divided into 46,608,796 units (the
Units) representing undivided fractional interests in the beneficial interest of the Trust equal to the number of shares of the common stock of Southland outstanding as of the close of business on November 3, 1980. Each stockholder
of Southland of record at the close of business on November 3, 1980 received one freely tradable Unit for each share of the common stock of Southland then held. Holders of Units in the Trust are referred to herein as Unit Holders. The Trustee The primary function of
the Trustee is to collect Royalty Income, to pay all expenses and charges of the Trust and distribute the remaining available income to the Unit Holders. The amount of income distributable to Unit Holders, which we refer to as Distributable
Income, depends on the amount of Royalty Income and interest received by the Trust, as well as the amount of expenses paid by the Trust and any change in cash reserves. The Trust has no employees, officers or directors. All administrative
functions of the Trust are performed by the Trustee. Effective June 10, 2019, Compass Bank changed its name to BBVA USA. Hilcorp Hilcorp is the principal operator of the majority of the Subject Interests and is responsible, subject to the terms of a prior agreement with
the Trust, for marketing the oil and natural gas production from such properties, either under existing sales contracts or under future arrangements, at the best prices and on the best terms it shall deem reasonably obtainable under the
circumstances. A very high percentage of the Royalty Income is attributable to the production and sale by Hilcorp of natural gas from the Subject Interests. Accordingly, the market price and demand for natural gas produced and sold from the San Juan
Basin heavily influences the amount of Royalty Income distributed by the Trust and, by extension, the price of the Units. Gross
Proceeds and Severance Tax Estimates.The sale of San Juan Basin assets, including the Subject Interests, from Burlington to Hilcorp closed on July 31, 2017. Hilcorp has advised the Trust that for certain months (since the closing of its
purchase of the assets), it has reported estimates of cash revenues and expenses based on the best information available to it at the time, instead of reporting actual amounts. Hilcorp further has informed the Trust that it believes that its
estimates have been prepared in accordance with the Conveyance, and the Trust and its advisors continue to review such estimates for compliance with the Conveyance.  5




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##### Table of Contents

Hilcorps process of reconciling actual revenue and severance taxes to previously
reported estimates (which the Trust refers to as true-ups) during fiscal years 2017, 2018, and 2019 are still occurring and being reported in 2020. Hilcorp has informed the Trust that as it
continues to refine further its estimating and reporting processes, Hilcorp will review prior periods to ensure greater accuracy and consistency, both for prior periods as well as future reporting periods. As part of that review process, Hilcorp
informed the Trust that it will reverse and rebook revenue for certain prior periods. Thus, distributions to the Trust from Hilcorp in any given month may be subject to adjustments based upon prior months
true-ups and rebooking, plus interest. During the three months ended September 30, 2020,
Hilcorp made true-up and rebooking adjustments to oil, gas, and other revenue and severance tax resulting in additional profits of $0.4 million gross (approximately $0.3 million net to the Trust)
based on the production months of January through March 2018, January, August and December 2019, and January and February 2020. The total of true-up and rebooking adjustments for the nine months ended
September 30, 2020 was an additional profit of $58,000 gross ($43,500 net). Hilcorp notified the Trust that as of the date of this
Quarterly Report, it will still need to adjust the previously reported production and financial information for the production months of April 2018 through December 2018 for operated wells and October 2017 through December 2017 and April 2018
through December 2018 for non-operated wells and, therefore, possibly adjust future distributions of net proceeds to reflect such rebooking and true-ups plus interest on
such amounts (as required by the Conveyance) to the extent an under-or over-payment has occurred. $2.0 Million in Additional Other Gross Proceeds Estimates. The Trust has been advised by Hilcorp that during the period
following the closing of its purchase of the Subject Interests from Burlington, Hilcorp included an additional $1.0 million in Other revenue in the gross proceeds estimates in each of the December 2017 and January 2018 distribution
months. This additional $2.0 million in Other revenue was based on Hilcorps estimated increases in natural gas production that were subsequently offset by lower natural gas prices. The third quarter of 2020 included a reduction of $1.5 million in Other gross proceeds, which reduced, but did not eliminate,
the previously reported $2.0 million in estimated Other gross proceeds. As of the date of this Quarterly Report, Hilcorp has not yet trued-up the remaining $0.5 million in
Other gross proceeds. As a result, once Hilcorp has finalized its true-ups, there could be a negative adjustment to the Other gross proceeds consisting of a reduction in Royalty Income
to the Trust by Hilcorp of the remaining estimated payment of up to $0.5 million. Commodity Prices. The Trusts income
and monthly distributions from the Subject Interests are heavily influenced by the price of oil and natural gas. These prices may fluctuate widely in response to relatively minor changes in the supply of and demand for oil and natural gas-based on market uncertainty or a variety of additional factors that are beyond the Trustees control. During the first two quarters of 2020, oil and natural gas prices decreased substantially due to
significantly decreased demand as a result of the novel coronavirus (Covid-19) pandemic. While oil and gas natural prices have increased in the third quarter, they are still below pre-pandemic levels. Additionally, a dispute over oil production levels between Russia and members of the Organization of Petroleum Exporting Countries (OPEC) created an oversupply of crude oil. The
dispute was ultimately resolved through agreed-upon production cuts, but not until June 2020. Both events put substantial downward pressure on the price of oil and natural gas in the first and second quarters of 2020, and while prices have somewhat
recovered and largely stabilized, the Trust cannot guarantee that the prices will not continue to be negatively affected by the aforementioned events.  6




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Results of Operations  for the Three and Nine Months Ended September 30, 2020
and 2019 Royalty Income Royalty Income consists of monthly net proceeds attributable to the Royalty. Royalty Income for the three and nine months ended
September 30, 2020 and 2019 was determined as shown in the following table:  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,2020


2019


2020


2019Gross proceeds from the Subject Interests:Natural Gas

$
8,474,484


$
8,736,787


$
28,640,859


$
39,499,293Oil


398,805



1,183,844



1,043,043



2,436,428Other


(773,604
)(1)


709,058
(2)


(877,651
)(1)(3)


1,723,058
(2)Total


8,099,685



10,629,689



28,806,251



43,658,779Production Costs:Severance tax  gas


1,332,878



850,397



2,748,720



4,293,406Severance tax  oil


95,451



98,879



151,368



203,331Lease operating expense and property tax


5,113,994



6,970,908



17,809,264



21,720,102Capital expenditures


60,486



4,690,372



120,665



7,650,613Other(4)


16,065



18,676



16,065



18,676Total


6,618,874



12,629,232



20,846,082



33,886,128Production costs in excess of gross proceeds


(1,480,811
)(5)


1,999,543



92,003



2,171,042Net profits










8,052,172



11,943,693Net overriding royalty interest


75
%


75
%


75
%


75
%Royalty Income









$
6,039,129


$
8,957,770  1.
Estimated revenue from non-operated properties and true-ups and adjustments of non-operated revenue for the production months of January through March 2018, negatively offset by a reduction of $1.5 million in
Other gross proceeds, being a portion of the total $2.0 million in Other revenue included in the estimated gross proceeds in the December 2017 and January 2018 distribution months. 2.
Estimated revenue from outside-operated properties, handling and processing income, and $0.2 million from
granted exceptions. 3.
Estimated revenue from non-operated properties and granted audit
exceptions with interest as a result of the 2018 audit, negatively offset by Hilcorps true-ups and adjustments of non-operated revenue from the February 2019
through July 2019 and October 2019 through November 2019 production months. 4.
Interest charges on excess production costs. 5.
Net proceeds (gross proceeds less production costs) for the three months ended September 30, 2020, were
$1,480,811, which reduced, but did not eliminate, the prior excess production costs of $1,572,814 from the three months ended June 30, 2020. Gross excess production costs applicable to the Subject Interests were $92,000 as of September 30,
2020, with 75%, or $69,000 (net), allocated to the Trust. There was no Royalty Income distributed to the Trust in the
three months ended September 30, 2020 due to excess production costs from the April 2020 production month. No Royalty Income was distributed to the Trust in the third quarter of 2019 primarily due to Hilcorps increased capital spending
pursuant to its 2019 capital spending plan. The Royalty Income distributed to the Trust for the nine months ended September 30, 2020 was lower than that distributed during the nine months ended September 30, 2019 due primarily to lower
natural gas pricing and a decrease in natural gas production. The average natural gas price increased from $1.26 per Mcf for the three months ended September 30, 2019 to $1.46 per Mcf for the three months ended September 30, 2020, and the
average natural gas price decreased from $1.86 per Mcf for the nine months ended September 30, 2019 to $1.47 per Mcf for the nine months ended September 30, 2020. Production of natural gas from the Subject Interests decreased from
6,925.842 Mcf for the three months ended September 30, 2019 to 5,786,304 Mcf for the three months ended September 30, 2020, and from 21,290,114 Mcf for the nine months ended September 30, 2019 to 19,521,825 Mcf for the nine months
ended September 30, 2020.  7




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##### Table of Contents

Gross Proceeds from Subject Interests.Total Gross proceeds decreased approximately
$2.5 million, or 24%,for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, and decreased approximately $14.9 million, or 34%, for the nine months ended September 30,
2020 compared to the nine months ended September 30, 2019. The decrease was due primarily to lower natural gas production and decreased natural gas prices along with a reimbursement by the Trust to Hilcorp of $1.5 million, being a portion
of the total $2.0 million in Other revenue included in the estimated gross proceeds in the December 2017 and January 2018 distribution months. Capital Expenditures. Capital expenditures by Hilcorp decreased approximately $4.6 million, or 99%, for the three months
ended September 30, 2020 compared to the three months ended September 30, 2019, and decreased approximately $7.5 million, or 98%, for the nine months ended September 30, 2020 compared to the nine months ended September 30,
2019. The decrease was attributable to Hilcorps reduced capital spending plan that the Trust announced on February 24, 2020 (the 2020 Plan). The 2020 Plan calls for total capital spending of $0.3 million for fiscal 2020. Severance Taxes.Aggregate severance taxes increased approximately $0.5 million, or 50%, for the three months ended
September 30, 2020 compared to the three months ended September 30, 2019, and decreased approximately $1.6 million, or 36%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.
The percentage increase in the three-month period is primarily attributable to Hilcorps true-ups of the first quarter of 2018 natural gas and oil severance taxes and the percentage decrease over the
nine-month period is primarily due to lower revenue. Severance taxes represented approximately 18% of gross proceeds for the three months ended September 30, 2020, compared to approximately 9% for the same period of 2019. The increase is
primarily attributable to Hilcorps true-ups of the first quarter of 2018 natural gas and oil severance taxes. Severances taxes represented approximately 10% of gross proceeds for both nine-month periods
ended September 30, 2020 and 2019. Lease Operating Expenses and Property Taxes. Lease operating expenses and property taxes
decreased $1.9 million, or 27%, for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 and decreased $3.9 million, or 18%, for the nine months ended September 30, 2020 compared to
the nine months ended September 30, 2019. The decrease is primarily due to lower compression and well servicing expenses in addition to decreases across other cost categories due to Hilcorps efforts to reduce operating costs in the
current price environment. Monthly leaseoperating expenses of the Subject Interests, including property taxes, for
the three months ended September 30, 2020 averaged approximately $1.7 million, compared to $2.3 million for the three months ended September 30, 2019. Monthly lease operating expenses of the Subject Interests, including property
taxes, for the nine months ended September 30, 2020 averaged $2.0 million, compared to an average of $2.4 million for the nine months ended September 30, 2019. Distributable Income  Three Months EndedSeptember 30,


Nine Months EndedSeptember 30,2020


2019


2020


2019Royalty income

$



$



$
6,039,129


$
8,957,770Interest income


396



5,633



6,010



23,347Total income


396



5,633



6,045,139



8,981,117General and administrative expenses


(290,344
)


(340,084
)


(1,238,724
)


(1,388,971
)Decrease in cash reserves


289,948



334,451



397,090



419,394Distributable income

$



$



$
5,203,505


$
8,011,540Distributable income per Unit (46,608,796 Units)

$
0.000000


$
0.000000


$
0.111642


$
0.171890 Distributable Income. There was no Distributable Income in either of the three month periods ended
September 30, 2020 and 2019. Distributable Income decreased by approximately $2.8 million, or 35%, to $5.2 million ($0.111642 per Unit) for the nine months ended September 30, 2020 from $8.0 million ($0.171890 per Unit) for
the nine months ended September 30, 2019. There was no Distributable Income in the third quarter of 2020 due primarily to lower gas production and to true-ups of prior periods by Hilcorp resulting in
excess production costs from the April 2020 production month. Gross excess production costs applicable to the Subject Interests were $92,000 as of September 30, 2020, with 75%, or $69,000 (net) allocated to the Trust.  8




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Based on 46,608,796 Units outstanding, the per-Unit
distributions during the third quarter of 2020 were as follows:  July

$
0.000000August


0.000000September


0.000000Quarter Total

$
0.000000 Interest Income.Interest income was lower for the three and nine months ended September 30, 2020
as compared to the same periods in 2019 due primarily to lower yields on short-term investments and lower cash balances. General& Administrative Expenses. General and administrative expenses decreased approximately 15%, for the
three months ended September 30, 2020 compared to the three months ended September 30, 2019 and decreased approximately 11%, for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The
decrease was primarily attributable to differences in timing in the receipt and payment of certain expenses by the Trust. Cash
Reserves. The Trust withdrew approximately $0.3 million from its cash reserve during the third quarter of 2020 to pay the Trusts general and administrative expenses due to the Trust receiving no Royalty Income during that period.
Total cash reserves were approximately $0.6 million as of September 30, 2020. The primary purpose of the cash reserves is to have sufficient funds to cover monthly general and administrative expenses in the event that there is insufficient
Royalty Income to cover such expenses. The Trustee will replenish the cash reserve once it begins to receive Royalty Income from Hilcorp. The Trustee does not anticipate any increases to the cash reserve above a level of $1.0 million in 2020,
although it cannot guarantee that the Trustee will not increase such cash reserves in the future. Liquidity and Capital Resources The Trusts principal source of liquidity and capital is Royalty Income. The Trusts distribution of income to Unit Holders is funded
by Royalty Income after payment of Trust expenses. The Trust is not liable for any production costs or liabilities attributable to the Royalty. If at any time the Trust receives more than the amount due under the Royalty, it is not obligated to
return such overpayment, but the amounts payable to it for any subsequent period are reduced by such amount, plus interest, at a rate specified in the Conveyance. If the Trustee determines that the Trust does not have sufficient funds to pay the
Trusts liabilities, the Trustee may borrow funds on behalf of the Trust, in which case no distributions will be made to Unit Holders until such borrowings are repaid in full. The Trustee may not sell or dispose of any part of the assets of the
Trust without the affirmative vote of 75% of all of the Units outstanding; however, the Trustee may sell up to 1% of the value of the Royalty (as determined pursuant to the Indenture) during any 12-month
period without the consent of the Unit Holders. In the event the Trust does not receive sufficient net cash payments from Hilcorp, the
Trust believes it has sufficient capacity to draw upon the cash reserve amount or borrow funds against the Royalty to cover the Trusts operating expenses until its cash reserve can be replenished from net cash payments from Hilcorp The Trust continues to request periodic updates from Hilcorp as to its production and financial expectations with respect to the Subject
Interests due to any effects caused by the ongoing Covid-19 pandemic and the recent fluctuations in oil and gas pricing. Hilcorp has informed the Trust that, given the current natural gas pricing environment,
Hilcorp does not anticipate materially reducing any of the Subject Interests production or taking any of the Subject Interests wells offline; however, both the Trust and Hilcorp continue to monitor the impact that Covid-19 may have on production, including as it relates to personnel availability in New Mexico and other Subject Interest areas. Hilcorp further informed the Trust that it does not anticipate that Covid-19 will have any material impact on its operation of the Subject Interests or on its payments of Royalty Income to the Trust. However, the impact of the Covid-19
pandemic on Hilcorp and the Subject Interests is still unknown and any such impact could result in actual results being different from Hilcorps expectations. Specifically, the Trust has noted that prices remain low, which may lead to further
reductions from expected negative true-ups for reported estimates from earlier periods in 2020. As noted in the Subsequent Events section above, the Trust replenished its cash reserves to $1.0 million in October. Additionally, per
its October 20, 2020 press release and Current Report on Form 8-K, the Trust made a monthly cash distribution to the holders of its Units of $651,100.95, or $0.013969 per Unit, based primarily upon
production during the month of August 2020. Oil and Natural Gas Production The natural gas volumes reported to the Trust by Hilcorp are based on plant residue gas volumes plus equivalent volumes for natural gas
liquids. Hilcorp converts one barrel of natural gas liquids to six Mcf of natural gas using industry standards.  9




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##### Table of Contents

Royalty Income for the three months ended September 30, 2020 is associated with oil and
natural gas production during May through July 2020 from the Subject Interests. Production of oil and natural gas and related average sales prices attributable to each of the Subject Interests and the Royalty for the three months ended
September 30, 2020 and 2019 were as follows:  For the Three Months Ended September 30,2020


2019Natural Gas(Mcf)


Oil andCondensate(Bbls)


Natural Gas(Mcf)


Oil andCondensate(Bbls)ProductionSubject Interests


5,786,304



14,195



6,925,842



26,139Royalty


946,233



6,245



(2,567,495
)(1)


17,512Average Price (per Mcf/Bbl)

$
1.46


$
28.09


$
1.26


$
45.29  1
The oil and natural gas sales attributable to the Royalty are based upon an allocation formula dependent on
such factors as price and cost, including Hilcorps capital expenditures pursuant to its 2019 CapEx Plan. The allocation formula for natural gas produced a negative volume due to excess production costs during the three month ended
September 30, 2019. Production of oil and natural gas and related average sales prices attributable to each of the
Subject Interests and the Royalty for the nine months ended September 30, 2020 and 2019 were as follows:  For the Nine Months Ended September 30,2020


2019Natural Gas(Mcf)


Oil andCondensate(Bbls)


Natural Gas(Mcf)


Oil andCondensate(Bbls)ProductionSubject Interests


19,521,825



33,517



21,290,114



53,710Royalty


1,951,351



16,408



796,414



32,746Average Price (per Mcf/Bbl)

$
1.47


$
31.12


$
1.86


$
45.36 The Trust recognizes production during the month in which the related net proceeds attributable to the Royalty
are paid to the Trust. Royalty Income for a calendar year is based on the actual natural gas and oil production during the period beginning with November of the preceding calendar year through October of the current calendar year. Sales volumes
attributable to the Royalty are determined by dividing the net profits by the Trust from the sale of oil and natural gas, respectively, by the prices received by Hilcorp for sales of such volumes from the Subject Interests, taking into consideration
production taxes attributable to the Subject Interests. Because the oil and natural gas sales attributable to the Royalty are based upon an allocation formula dependent on such factors as price and cost, including Hilcorps capital
expenditures and the timing of Hilcorps true-ups of prior reported estimated oil and natural gas production data, the aggregate sales amounts from the Subject Interests may not provide a meaningful
comparison to sales attributable to the Royalty. Future true-ups will affect future royalty proceeds, but will not change the reported amounts due to the accounting basis used. The fluctuations in natural gas production that have occurred during the three-month period ended September 30, 2020 and 2019,
respectively, generally resulted from changes in the demand for natural gas during that time, market conditions, and variances in capital spending to generate production from new and existing wells, as offset by the natural production decline
curve. In addition, production from the Subject Interests is influenced by the line pressure of the natural gas gathering systems in the San Juan Basin. As noted above, oil and natural gas sales attributable to the Royalty are based on an
allocation formula dependent on many factors, including oil and natural gas prices and capital expenditures. Marketing There were no changes to the contracts pursuant to which Hilcorp sells production from the Subject Interests and for the gathering and
processing of production during the three months ended September 30, 2020.  10




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##### Table of Contents

Off-Balance Sheet Arrangements None. Critical Accounting Policies and
Estimates For a discussion of significant accounting policies and estimates that affect the Trusts financial statements, see
Part I, Item 1. Unaudited Financial Statements, Note 1 Basis of Presentation and Part II, Item 8. Financial Statements and Supplemental Data contained in the Trusts Annual Report on Form 10-K for the
year ended December 31, 2019. Information Regarding 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 SEC (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, as amended (the Exchange Act) and Section 27A of the Securities Act of 1933, as amended. Such forward-looking statements may involve or may concern, among other things, the amount and variability
in capital expenditures by Hilcorp, drilling activity, development activities, production efforts and volumes, hydrocarbon prices, estimated future net revenues, estimates of reserves, the results of the Trusts activities, the differences
between Hilcorps estimated revenue and actual revenue, and regulatory matters. Such forward-looking statements generally are accompanied by words such as may, will, based, estimate,
expect, predict, project, anticipate, believe, plan, intend, or other words that convey the uncertainty of future events or outcomes. Such statements are based on
certain assumptions of BBVA USA, the Trustee, and by Hilcorp, with respect to future events; are based on an assessment of, and are subject to, a variety of factors deemed relevant by the Trustee and Hilcorp; and involve risks and uncertainties.
However, whether actual results and developments will conform with such expectations and predictions is subject to a number of risks and uncertainties which could affect the future results of the energy industry in general, and the Trust and Hilcorp
in particular, and could cause those results to differ materially from those expressed in such forward-looking statements. The actual results or developments anticipated may not be realized or, even if substantially realized, they may not have the
expected consequences to or effects on Hilcorps business and the Trust. Such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in such forward-looking statements.
The Trust undertakes no obligation to publicly update or revise any forward-looking statements, except as required by applicable law. Hilcorp Information As a
holder of a net overriding royalty interest, the Trusts reporting of financial information is reliant upon Hilcorp to accurately and timely report information regarding Hilcorp and its affiliates; the Subject Interests, including the
operations, acreage, well and completion count, working interests, production volumes, sales revenues, capital expenditures, operating expenses, reserves, drilling plans, drilling results and leasehold terms related to the Subject Interests, and
factors and circumstances that have or may affect the foregoing. See Part I, Item 4. Controls and Procedures. The Trust continues to
request periodic updates from Hilcorp as to its production and financial expectations with respect to the Subject Interests due to any effects caused by the ongoing Covid-19 pandemic and the recent
fluctuations in oil and gas pricing. Hilcorp has informed the Trust that, given the current natural gas pricing environment, Hilcorp does not anticipate materially reducing any of the Subject Interests production or taking any of the Subject
Interests wells offline; however, both the Trust and Hilcorp continue to monitor the impact that Covid-19 may have on production, including as it relates to personnel availability in New Mexico and other
Subject Interest areas. Hilcorp further informed the Trust that it does not anticipate that Covid-19 will have any material impact on its operation of the Subject Interests or on its payments of Royalty
Income to the Trust. However, the impact of the Covid-19 pandemic on Hilcorp and the Subject Interests is still unknown and any such impact could result in actual results being different from Hilcorps
expectations. Specifically, the Trust has noted that prices remain low, which may lead to further reductions from expected negative true-ups for reported estimates from earlier periods in 2020. For information on the Trusts exposure to market risk, please see Part II, Item 7A, Quantitative and Qualitative Disclosures About
Market Risk contained in the Trusts Annual Report on Form 10-K for the year ended December 31, 2019.  Item 3.
Quantitative and Qualitative Disclosures about Market Risk. None.  11




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##### Table of Contents

Item 4.
Controls and Procedures. The Trust maintains a system of internal disclosure controls and procedures that is designed to ensure that the information required to be
disclosed in the Trusts filings under the Exchange Act is recorded, processed, summarized, and reported within the periods specified in the SECs rules and forms. In its evaluation of its disclosure controls and procedures, the Trustee
has relied, to the extent considered reasonable, on information provided by Hilcorp, the owner of the properties. Consequently, the Trusts ability to disclose timely and accurately relevant information in its periodic reports is dependent upon
Hilcorps timely delivery of accurate oil and gas revenue and production cost information and, therefore, the net proceeds owed to the Trust. The Net Overriding Royalty Conveyance (the Conveyance) that transferred the royalty to the Trust obligates Hilcorp to provide the
Trust with certain financial and operational information, including information concerning calculations of net proceeds owed to the Trust. Once the Trust receives the financial information from Hilcorp, the Trust engages independent public
accountants, compliance auditors, attorneys and petroleum engineers in order to assist the Trustee to ensure the accuracy and completeness of the information required to be disclosed in the Trusts periodic reports. These outside professionals
advise the Trustee in its review and compilation of this information for inclusion in this Quarterly Report on Form 10-Q and the other periodic reports provided by the Trust to the SEC. Despite the Trusts internal controls and procedures ensuring the accuracy of the Trusts reporting based upon the financial
information received from Hilcorp, Hilcorps process of reconciling actual revenue and severance taxes to previously reported estimates and reversing and rebooking periods during fiscal 2017, 2018, and 2019 are still occurring and being
reported in 2020. Thus, distributions to the Trust from Hilcorp in any given month may be subject to adjustment based upon prior months true-ups and rebooking, plus interest. Hilcorp notified the Trust
that as of the date of this Quarterly Report, it will still need to adjust the previously reported production and financial information for the production months of April 2018 through December 2018 for operated wells and October 2017 through
December 2017 and April 2018 through December 2018 for non-operated wells and, therefore, possibly adjust future distributions of net proceeds to reflect such rebooking and
true-ups plus interest on such amounts (as required by the Conveyance) to the extent an under- or over-payment has occurred. The Trustee has evaluated the Trusts internal disclosure controls and procedures as of September 30, 2020, and has concluded that
such disclosure controls and procedures are effective, at the reasonable assurance level (as such term is used in Rule 13a-15(f) of the Exchange Act), to ensure that material information received
from Hilcorp is gathered on a timely basis to be included in the Trusts periodic reports and recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Additionally, during the three months ended September 30, 2020, there were no changes in the Trusts internal control over financial
reporting (as such term is used in Rule 13a-15(f) of the Exchange Act) that materially affected, or are reasonably likely to materially affect, the Trusts internal control over financial reporting.
Because the Trust does not have, nor does the Indenture provide for, officers, a board of directors or an independent audit committee, the Trustee has reviewed neither the Trusts disclosure controls and procedures nor the Trusts internal
control over financial reporting in concert with management, a board of directors or an independent audit committee. PART II OTHER INFORMATION  Item 1.
Legal Proceedings. None.  Item 1A.
Risk Factors. Not required.  Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds. None.  Item 3.
Defaults Upon Senior Securities. None.  12




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##### Table of Contents

Item 4.
Mine Safety Disclosures. Not applicable.  Item 5.
Other Information. None.  13




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##### Table of Contents

Item 6.
Exhibits.  ExhibitNumber

Description(4)(a)

San Juan Basin Amended and Restated Royalty Trust Indenture, dated December 
12, 2007, filed as Exhibit 99.2 to the Trusts Current Report on Form 8-K filed with the SEC on December 14, 2007, and incorporated herein by reference.*(4)(b)

Net Overriding Royalty Conveyance from Southland Royalty Company to The Fort Worth National Bank, as Trustee, dated November 
1, 1980 (without Schedules), filed as Exhibit 4(b) to the Trusts Annual Report on Form 10-K filed with the SEC for the year ended December 31, 2006 on March 
1, 2007, and 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 Texas Bank, filed as Exhibit 4(c) to the Trusts Quarterly Report on Form 10-Q filed with the SEC for the quarter ended September 
30, 2002, and incorporated herein by reference.*31

Certification required by Rule 13a-14(a), dated November 16, 2020, by Joshua R. Peterson, Head of Trust Real Assets 
& Mineral Resources and Senior Vice President of BBVA USA, the Trustee of the Trust.**32

Certification required by Rule 13a-14(b), dated November 16, 2020, by Joshua R. Peterson, Head of Trust Real Assets 
& Mineral Resources and Senior Vice President of BBVA USA, on behalf of BBVA USA, 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,
BBVA USA, 2200 Post Oak Blvd., Floor 18, Houston, Texas 77056. **
Filed herewith. ***
Furnished herewith.  14




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##### Table of Contents

SIGNATURE 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.  BBVA USA, AS TRUSTEE OF THESAN JUAN BASIN ROYALTY TRUSTBy:

/s/ Joshua R. PetersonJoshua R. PetersonHead of Trust Real Assets & Mineral Resources and Senior Vice President
 Date: November 16, 2020 (The Trust has no directors or executive officers.)