<PAGE>
 
                       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 March 31, 1997


                           Commission File No. 1-8032



                          SAN JUAN BASIN ROYALTY TRUST


Texas                                                   I.R.S. No. 75-6279898


                    Bank One, Texas, N.A., Trust Department
                                 P. O. Box 2604
                            Fort Worth, Texas 76113

                         Telephone Number 817/884-4630



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 and (2) has been subject to such filing requirements for
the past 90 days.  Yes X  No
                      ---    ---

Number of units of beneficial interest outstanding at May 15, 1997:   46,608,796
                                                                      ----------

                                  Page 1 of 12
<PAGE>
 
                          SAN JUAN BASIN ROYALTY TRUST

                         PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements

The condensed financial statements included herein have been prepared by Bank
One, Texas, N.A. as Trustee for the San Juan Basin Royalty Trust, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in annual
financial statements have been condensed or omitted pursuant to such rules and
regulations, although the Trustee believes that the disclosures are adequate to
make the information presented not misleading.  It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and the notes thereto included in the Trust's latest annual report on
Form 10-K.  In the opinion of the Trustee, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the assets,
liabilities and trust corpus of the San Juan Basin Royalty Trust at March 31,
1997, and the distributable income and changes in trust corpus for the three-
month periods ended March 31, 1997 and 1996 have been included.  The
distributable income for such interim periods is not necessarily indicative of
the distributable income for the full year.

Deloitte & Touche LLP, independent certified public accountants, has made a
review of the condensed financial statements as of March 31, 1997 and for the
three-month periods ended March 31, 1997 and 1996 included herein.

                                      -2-
<PAGE>
 
INDEPENDENT ACCOUNTANTS' REPORT

Bank One, Texas, N.A. as Trustee for the
  San Juan Basin Royalty Trust:

We have reviewed the accompanying condensed statement of assets, liabilities and
trust corpus of the San Juan Basin Royalty Trust as of March 31, 1997 and the
related condensed statements of distributable income and changes in trust corpus
for the three-month periods ended March 31, 1997 and 1996.  These financial
statements are the responsibility of the Trustee.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters.  It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole.  Accordingly, we do not express such an opinion.

The accompanying condensed financial statements are prepared on a modified cash
basis as described in Note 1, which is a comprehensive basis of accounting other
than generally accepted accounting principles.

Based on our review, we are not aware of any material modifications that should
be made to such condensed financial statements for them to be in conformity with
the basis of accounting described in Note 1.

We have previously audited, in accordance with generally accepted auditing
standards, the statement of assets, liabilities and trust corpus of the San Juan
Basin Royalty Trust as of December 31, 1996, and the related statements of
distributable income and changes in trust corpus for the year then ended (not
presented herein); and in our report dated March 25, 1997, we expressed an
unqualified opinion on those financial statements.  In our opinion, the
information set forth in the accompanying condensed statement of assets,
liabilities and trust corpus as of December 31, 1996 is fairly stated in all
material respects in relation to the statement of assets, liabilities and trust
corpus from which it has been derived.




DELOITTE & TOUCHE LLP

May 9, 1997
<PAGE>
 
<TABLE>
<CAPTION>
SAN JUAN  BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF ASSETS, LIABILITIES AND TRUST CORPUS
---------------------------------------------------------------------------------------------------------
                                                                       MARCH 31,          DECEMBER 31,
ASSETS                                                                   1997                1996
                                                                      (UNAUDITED)
<S>                                                                  <C>                 <C>
Cash and short-term investments                                      $ 7,129,116         $ 3,127,828
Net overriding royalty interests in producing oil and
  gas properties (net of accumulated amortization of
  $72,638,317 and $70,467,380 at March 31, 1997
  and December 31, 1996, respectively)                                60,637,211          62,808,148    
                                                                     -----------         -----------   
                                                                     $67,766,327         $65,935,976    
                                                                     ===========         ===========   
LIABILITIES AND TRUST CORPUS   

Distribution payable to Unit holders (Note 3)                        $ 7,129,116         $ 3,127,828
Commitments and contingencies (Note 3)
Trust corpus - 46,608,796 Units of beneficial
   interest authorized and outstanding                                60,637,211          62,808,148
                                                                     -----------         -----------
                                                                     $67,766,327         $65,935,976
                                                                     ===========         ===========
</TABLE>

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF DISTRIBUTABLE INCOME (UNAUDITED)
-----------------------------------------------------------------------------------------------------
                                                                             THREE MONTHS ENDED
                                                                                  MARCH 31,
                                                                    ---------------------------------
                                                                        1997                   1996
<S>                                                                  <C>                <C>

Royalty income                                                        $18,471,262        $4,707,617   
Interest income                                                            27,657             6,507   
                                                                      -----------         ---------   
                                                                       18,498,919         4,714,124   
                                                                                                      
General and administrative expenditures                                   231,502           787,774   
                                                                                                      
Distributable income                                                  $18,267,417        $3,926,350   
                                                                      ===========        ==========   
Distributable income per Unit (46,608,796 Units)                      $   .391930        $  .084239   
                                                                      ===========        ==========   

The accompanying notes to condensed financial statements are an integral part of these statements.
</TABLE>

                                      -4-
<PAGE>
 
<TABLE>
<CAPTION>
SAN JUAN BASIN ROYALTY TRUST

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS (UNAUDITED)
-------------------------------------------------------------------------------------------------

                                                                      THREE MONTHS ENDED
                                                                           MARCH 31,
                                                               ---------------------------------
                                                                    1997               1996
<S>                                                            <C>               <C>

Trust corpus, beginning of period                              $62,808,148       $70,133,536   
Amortization of net overriding royalty interest                 (2,170,937)       (1,642,157)
Distributable income                                            18,267,417         3,926,350   
Distributions declared                                         (18,267,417)       (3,926,350)
                                                               -----------       -----------   
Trust corpus, end of period                                    $60,637,211       $68,491,379   
                                                               ===========       ===========   

</TABLE>
The accompanying notes to condensed financial statements are an integral part 
of this statement.


                                      -5-
<PAGE>
 
SAN JUAN BASIN ROYALTY TRUST

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------

1. BASIS OF ACCOUNTING

   The San Juan Basin Royalty Trust ("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 by the
      working interest owner, Burlington Resources Oil & Gas ("BROG"), to the
      Trustee for the Trust. Royalty income consists of the amounts received by
      the owner of the interest burdened by the net overriding royalty interest
      ("Royalty") 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%.

   .  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 overriding royalty interest to the
      Trust provides that any excess of production costs over gross proceeds
      must be recovered from future net profits.

   The financial statements of the Trust differ from financial statements
   prepared in accordance with 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; and amortization of
   the Royalty calculated on a unit-of-production basis is charged directly to
   trust corpus.

2. FEDERAL INCOME TAXES

   For 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 the tax treatment
   described above.

   The Trust began receiving royalty income from  coal seam wells beginning in
   1989.  Under Section 29 of the Internal Revenue Code, production from coal
   seam gas wells drilled prior to January 1, 1993, qualifies for the federal
   income tax credit for producing non-conventional fuels.  This tax credit was
   approximately $1.03 per MMBtu for the year 1996 and is adjusted for inflation
   annually.  The credit currently applies to production through the year 2002.
   Production from wells drilled after

                                      -6-
<PAGE>
 
   December 31, 1979, but prior to January 1, 1993, to a formation beneath a
   qualifying coal seam formation which are later completed into such formation
   also qualifies for the tax credit. Each Unit holder must determine his pro
   rata share of such production based upon the number of Units owned during
   each month of the year and apply the tax credit against his own income tax
   liability, but such credit may not reduce his regular tax liability (after
   the foreign tax credit and certain other nonrefundable credits) below his
   tentative minimum tax. Section 29 also provides that any amount of Section 29
   credit disallowed for the tax year solely because of this limitation will
   increase his credit for prior year minimum tax liability, which may be
   carried forward indefinitely as a credit against the taxpayer's regular tax
   liability, subject, however, to the limitations described in the preceding
   sentence. There is no provision for the carryback or carryforward of the
   Section 29 credit in any other circumstances.

   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 will generally be treated as portfolio income and
   will not reduce passive losses.

                                     ******

                                      -7-
<PAGE>
 
ITEM 2.  TRUSTEE'S DISCUSSION AND ANALYSIS

FORWARD LOOKING INFORMATION

Certain information included in this report 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, as
amended, and Section 27A of the Securities Act of 1933, as amended.  Such
forward looking statements may be or may concern, among other things, capital
expenditures, drilling activity, development activities, production efforts and
volumes, hydrocarbon prices and the results thereof, and regulatory matters.
Such forward looking statements generally are accompanied by words such as
"estimate," "expect," "predict," "anticipate," "goal," "should," "assume,"
"believe," or other words that convey the uncertainty of future events or
outcomes.

THREE MONTHS ENDED MARCH 31, 1997 AND 1996

During the first quarter of 1997, the San Juan Basin Royalty Trust received
royalty income of $18,471,262.  Distributable income consists of royalty income
plus interest income less administrative expenses.  Interest income for the
quarter was $27,657 and administrative expenses were $231,502.  Thus,
distributable income totaled $18,267,417.  Based on 46,608,796 Units
outstanding, the per Unit distributions during the first quarter of 1997 were as
follows:

        January                                 $.101024
        February                                 .137950
        March                                    .152956
                                                --------

        Quarter Total                           $.391930
                                                ========

The amount distributed to Unit holders in the first quarter of 1997 was more
than the $.084239 distributed in the first quarter of 1996.  The increase was
primarily attributable to an increase in the average gas price from $1.17 per
Mcf for the first quarter of 1996 to $3.05 per Mcf for the first quarter of 1997
and lower administrative expenses in 1997.  The tax credit relating to
production from coal seam wells totaled approximately $.06 per Unit for the
first quarter of 1997 compared to $.04 per Unit for the first quarter of 1996.

Interest income for the first quarter of 1997 was more than the $6,507 in the
first quarter of 1996 due to increased funds available for investment and higher
interest rates. Administrative expenses of $231,502 were lower in the first
three months of 1997 as compared to $787,774 in the first quarter of 1996,
primarily as a result of a decrease in the Trust's legal and other expenses
relating to the settlement of litigation involving the Trust and Burlington
Resources Oil & Gas Company ("BROG"). Unit holders are referred to "Trustee's
Discussion and Analysis" in the Trust's Annual Report for 1996 for additional
information regarding the settlement.

Capital expenditures incurred by BROG, attributable to the properties from which
the Royalty was carved, for the first quarter of 1997 amounted to $2,320,206.
Capital expenditures were $1,374,090 for the first quarter of 1996.  The
increase in capital expenditures in 1997 is primarily due to increased drilling
activity.

In the first quarter of 1997, 13 gross (.51 net) conventional wells were
completed on the properties from which the Royalty was carved. One gross (.84
net) coal seam well was recompleted and 4 gross (.55 net) coal seam wells were
recavitated through March 31, 1997. There was one gross (.83 net) conventional
well recompleted through March 31, 1997. There were 13 gross (2.15 net)
conventional wells, 1 gross (.87 net) conventional well recompletion, 1 gross
(.04 net) coal seam well and 4 gross (.16 net) recompletions to
                                      -8-
<PAGE>
 
Fruitland Coal from other formations in progress on March 31, 1997. In the first
quarter of 1996, 1 gross (.5 net) coal seam well was completed on the properties
from which the Royalty was carved. There were 3 gross (.81) coal seam wells in
progress on March 31, 1996. Two gross (1.59 net) coal seam wells were
recavitated, and 4 gross (.17 net) coal seam well recavitations were in progress
through March 31, 1996. There were 7 gross (1.14 net) conventional wells
completed and 7 gross (1.15 net) conventional wells in progress at March 31,
1996. Six gross (3.88 net) conventional wells were recompleted, and 2 gross (.75
net) conventional recompletions were in progress through March 31, 1996. Unit
holders are referred to "Description of the Properties" in the Trust's Annual
Report for 1996 for further information concerning BROG's coal seam well
drilling program in the San Juan Basin. This program includes properties in
which the Trust owns an interest.

Royalty income for the quarter ended March 31, 1997 is associated with actual
gas and oil production during November 1996 through January 1997 from the
properties from which the Royalty was carved.  Gas and oil sales for the
quarters ended March 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
                                                       1997         1996
PROPERTIES FROM WHICH THE ROYALTIES WERE CARVED:
<S>                                                <C>          <C>
Gas:
 Total sales (Mcf)                                   10,613,520   9,661,249
 Mcf per day                                            115,364     105,014
 Average price (per Mcf)                            $      3.05  $     1.17
 
Oil:
 Total sales (Bbls)                                      20,962      20,079
 Bbls per day                                               228         218
 Average price (per Bbl)                            $     22.64  $    18.10
 
ROYALTIES:
Gas sales (Mcf)                                       6,542,089   4,439,622
Oil sales (Bbls)                                         12,663       9,116
</TABLE>

Coal seam gas production increased from 3,984,792 Mcf in the first quarter of
1996 to 5,020,207 Mcf in the first quarter of 1997. The price paid for gas
production increased during the first quarter of 1997. Gas volumes increased in
the first quarter of 1997 primarily due to the increased volumes from coal seam
wells.

The price received per barrel of oil in the first quarter of 1997 was higher
than that received in the first quarter of 1996.  Lease operating expenses and
property taxes totaled approximately $2,887,013 during the first quarter of 1997
compared to approximately $2,659,548 for the first quarter of 1996.

Since the gas and oil 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 production volumes from properties from
which the Royalty was carved do not provide a meaningful comparison to volumes
attributable to the Royalty.

                                      -9-
<PAGE>
 
CALCULATION OF ROYALTY INCOME

Royalty income received by the Trust for the three months ended March 31, 1997
and 1996 was computed as shown in the following table:

<TABLE>
<CAPTION>
<S>                                                        <C>             <C>
                                                              1997               1996
Gross proceeds of sales from the properties from
   which the net overriding royalty was carved:
   Gas proceeds                                             $32,404,871     $11,264,797
   Oil proceeds                                                 474,537         363,515
                                                            -----------     -----------
Total                                                        32,879,408      11,628,312
                                                            -----------     -----------
Less production costs:                                                                 
   Severance tax - Gas                                        2,994,864       1,274,815
   Severance tax - Oil                                           48,975          43,035
   Lease operating expense and property tax                   2,887,013       2,659,548
   Capital expenditures                                       2,320,206       1,374,091
                                                            -----------     -----------
Total                                                         8,251,058       5,351,489
                                                            -----------     -----------
Net profits                                                  24,628,350       6,276,823
Net overriding royalty interest                                      75 %            75 %
                                                            -----------     -----------
Royalty income                                              $18,471,262     $ 4,707,617
                                                            ===========     ===========
</TABLE>

                                      -10-
<PAGE>
 
                          PART II - OTHER INFORMATION


Item 1.     Legal Proceedings

Items 2-5   Not Applicable

Item 6.     Exhibits and Reports on Form 8-K

         (a)  Exhibits

            (4)(a) San Juan Basin Royalty Trust Indenture dated November 3,
                1980, between Southland Royalty Company and The Fort Worth
                National Bank (now Bank One, Texas, N.A.), as Trustee,
                heretofore filed as Exhibit (4)(a) to the Trust's Annual Report
                on Form 10-K to the Securities and Exchange Commission for the
                fiscal year ended December 31, 1980 is incorporated herein by
                reference.

            (4)(b) Net Overriding Royalty Conveyance from Southland Royalty
                Company to The Fort Worth National bank (now Bank One, Texas,
                N.A.), as Trustee, dated November 3, 1980 (without Schedules),
                heretofore filed as Exhibit (4)(b) to the Trust's Annual Report
                on Form 10-K to the Securities and Exchange Commission for the
                fiscal year ended December 31, 1980 is incorporated herein by
                reference.

            (27)  Financial Data Schedule

         (b)   No reports on Form 8-K have been filed during the quarter for
               which this report is filed.

                                      -11-
<PAGE>
 
                                   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.

                             BANK ONE, TEXAS, N.A. AS TRUSTEE FOR THE SAN
                             JUAN BASIN ROYALTY TRUST


                                        By  /s/ LEE ANN ANDERSON
                                          -----------------------------------
                                                Lee Ann Anderson
                                                  Vice President

Dated as of May 15, 1997


              (The Trust has no directors or executive officers.)

                                      -12-
<PAGE>
 
                               INDEX TO EXHIBITS


                                                                 SEQUENTIALLY
       EXHIBIT                                                     NUMBERED
       NUMBER                        EXHIBIT                         PAGE

        (4)(a) San Juan Basin Royalty Trust Indenture dated
               November 3, 1980, between Southland Royalty
               Company and The Fort Worth National Bank (now
               Bank One, Texas, N.A.), as Trustee, heretofore
               filed as Exhibit (4)(a) to the Trust's Annual
               Report on Form 10 K to the Securities and
               Exchange Commission for the fiscal year ended
               December 31, 1980 is incorporated herein by
               reference.*


        (4)(b) Net Overriding Royalty Conveyance from Southland
               Royalty Company to The Fort Worth National bank
               (now Bank One, Texas, N.A.), as Trustee, dated
               November 3, 1980 (without Schedules), heretofore
               filed as Exhibit (4)(b) to the Trust's Annual
               Report on Form 10-K to the Securities and Exchange
               Commission for the fiscal year ended December 31,
               1980 is incorporated herein by reference.*

        (27)   Financial Data Schedule **


*   A copy of this Exhibit is available to any Unit holder, at the actual cost
    of reproduction, upon written request to the Trustee, Bank One, Texas, N.A.,
    P.O. Box 2604, Fort Worth, Texas 76113.
**  Filed herewith.

                                      -13-