The San Juan sag, concealed by the vast San Juan volcanic field of south-central Colorado, has only recently benefited from oil and gas wildcat drilling and evaluations. Sound geochemical analyses and maturation modeling are essential elements for successful exploration and development. Oil has been produced in minor quantities from an Oligocene sill in the Mancos Shale within the sag, and major oil and gas production occurs from stratigraphically equivalent rocks in the San Juan basin to the southwest and in the Denver basin to the northeast. The objectives of this study were to identify potential source rocks, assess thermal maturity, and determine hydrocarbon-source bed relationships. Source rocks are present in the San Juan sag in the upper and lower Mancos Shale (including the Niobrara Member), which consists of about 666 m (2184 ft) of marine shale with from 0.5 to 3.1 wt. % organic carbon. Pyrolysis yields (S1 + S2 = 2000-6000 ppm) and solvent extraction yields (1000-4000 ppm) indicate that some intervals within the Mancos Shale are good potential source rocks for oil, containing type II organic matter, according to Rock-Eval pyrolysis assay. Oils produced from the San Juan sag and adjacent part of the San Juan basin are geochemically similar to rock extracts obtained from these potential source rock intervals. Based on reconstruction of the geologic history of the basin integrated with models of organic maturation, we conclude that most of the source rock maturation occurred in the Oligocene and Miocene. Little to no maturation took place during Laramide subsidence of the basin, when the Animas and Blanco Basin formations were deposited. The timing of maturation is unlike that of most Laramide basins in the Rocky Mountain region, where maturation occurred as a result of Paleocene and Eocene basin fill. The present geothermal gradient in the San Juan sag is slightly higher (average 3.5 degrees C/100 m; 1.9 degrees F/100 ft) than the regional average for southern Rocky Mountain basins; however, although the sag contains intrusives and a volcanic cover, the gradient is significantly lower than that reported for parts of the adjacent San Juan basin (4.7 degrees C/100 m; 2.6 degrees F/100 ft). Burial depth appears to be a more important controlling factor in the thermal history of the source rocks than local variations in the geothermal gradient due to volcanic activity. Interestingly, the thick overburden of volcanic rocks appears to have provided the necessary burial depth for maturation.