10-12G

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

PURSUANT TO SECTION 12(b) OR 12(g) OF

THE SECURITIES EXCHANGE ACT OF 1934

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RIDGEWOOD ENERGY S FUND, LLC

(Exact Name of Registrant as Specified in its Charter)

Delaware                                   20-4077773

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(State of other Jurisdiction of           (I.R.S. Employer Identification No.)

Incorporation or Organization)

1314 King Street, Wilmington, Delaware         19801

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(Address of Principal Executive Offices)       (Zip Code)

Registrant's telephone number, including area code (302) 888-7444

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Securities to be registered pursuant to Section 12(b) of the Act: None

Securities to be registered pursuant to Section 12(g) of the Act:

Title of each class:

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Shares of Membership Interest

TABLE OF CONTENTS
		Page
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 2.	Financial Information	18
Item 3.	Properties	25
Item 4.	Security Ownership of Certain Beneficial Owners and Management	25
Item 5.	Directors and Executive Officers	26
Item 6.	Executive Compensation	27
Item 7.	Certain Relationships and Related Transactions and Director Independence	27
Item 8.	Legal Proceedings	28
Item 9.	Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters	28
Item 10.	Recent Sales of Unregistered Securities	28
Item 11.	Description of Registrant's Securities to be Registered	28
Item 12.	Indemnification of Directors and Officers	32
Item 13.	Financial Statements and Supplementary Data	32
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	32
Item 15.	Financial Statements and Exhibits	32

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FORWARD-LOOKING STATEMENTS

Certain statements in this Registration Statement on Form 10 (“Registration Statement”) and the documents Ridgewood Energy S Fund, LLC has incorporated by reference into this Registration, other than purely historical information, including estimates, projections, statements relating to the Fund’s business plans, strategies, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “target,” “pursue,” “may,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Item 1A. “Risk Factors” of this Registration Statement. The Fund undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

AVAILABLE INFORMATION

The Fund’s shares will be registered under Section 12(g) of the Exchange Act. The Fund will therefore comply with, among other things, the periodic reporting requirements of Section 13(a) of the Act. As a result, the Fund will prepare and file annual reports with the United States Securities and Exchange Commission (“SEC”) on Form 10-K, quarterly reports on Form 10-Q and, from time to time, current reports on Form 8-K. Moreover, the Manager maintains a website at http://www.ridgewoodenergy.com that contains important information about the Manager, including biographies of key management personnel, as well as information about the oil and natural gas investments made by the Fund and the other investment programs managed by the Manager. Such information includes, without limitation, a map of the Gulf of Mexico that provides the location of every well and project managed by the Manager along with information as to whether the project is exploratory, in completion or producing. This information is publicly available (i.e., not password protected) and is updated regularly.

REPORTS TO SHAREHOLDERS

The Fund does not anticipate providing annual reports to shareholders but will make available upon request copies of the Fund's periodic reports to the SEC on Form 10-K and on Form 10-Q.

WHERE YOU CAN GET MORE INFORMATION

The Fund will file annual, quarterly and current reports and certain other information with the SEC. Persons may read and copy any documents the Fund files at the SEC’s public reference room at 100 F Street, NE, Washington D.C. 20549. You may obtain information on the operation at the public reference room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. A copy of any such filings will be provided free of charge to any shareholder upon written request to the Fund at its business address 947 Linwood Avenue, Ridgewood, New Jersey 07450, ATTN: General Counsel.

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ITEM 1. BUSINESS

Overview

Ridgewood Energy S Fund, LLC (the "Fund"), (an exploratory stage enterprise) is a Delaware limited liability company and was formed on December 19, 2005 to acquire interests primarily in oil and natural gas projects located in the U.S. waters of the Gulf of Mexico. Ridgewood Energy Corporation ("Ridgewood Energy" or the “Manager”), a Delaware corporation, is the Manager. As the Manager, Ridgewood Energy has direct and exclusive control over the management and control of Fund operations. The Fund is engaged in the acquisition, development and production of oil and natural gas projects in the Gulf of Mexico. To date, the Fund has focused primarily on acquiring oil and natural gas projects in the shallow waters of the Gulf of Mexico in locations with access to existing gathering and processing infrastructure or where such infrastructure can be constructed economically and efficiently.

The Fund initiated its private placement offering on February 1, 2006, selling whole and fractional shares of membership interests primarily at $150 thousand per share. There is no public market for these shares and one is not likely to develop. In addition, the shares are subject to severe restrictions on transfer and resale and cannot be transferred or resold except in accordance with the Fund's LLC operating agreement and applicable federal and state securities laws. The offering was terminated on June 12, 2006. The Fund raised approximately $124.4 million. After payment of approximately $19.9 million in offering fees, commissions and investment fees, the Fund had approximately $104.5 million for investments and operating expenses. As of April 16, 2007, the Fund had 1,300 shareholders.

Manager

Ridgewood Energy was founded in 1982 by Robert E. Swanson. As the Manager, Ridgewood Energy has direct and exclusive control over the management of the Fund's operations. With respect to project investment, Ridgewood Energy locates potential projects, conducts appropriate due diligence and negotiates and completes the transactions in which the investments are made. This includes not only review of existing title documents, reserve information, and other technical specifications regarding a project, but also the review and preparation of participation agreements and other agreements relating to an investment.

In addition, Ridgewood Energy performs (or arranges for the performance of) the management and administrative services required for Fund operations. Among other services, Ridgewood Energy administers the accounts and handles relations with the shareholders, including tax and other financial information. In addition, Ridgewood Energy provides the Fund with office space, equipment and facilities and other services necessary for its operation. Finally, Ridgewood Energy manages and conducts the Fund's relations with custodians, depositories, accountants, attorneys, brokers-dealers, corporate fiduciaries, insurers, banks and others, as required.

The Fund is required to pay all other expenses it incurs, including expenses of preparing and printing periodic reports for shareholders and the SEC, commission fees, taxes, outside legal, accounting and consulting fees, litigation expenses and other expenses, if any, properly payable by us. The Fund is required to reimburse the Manager for all such Fund expenses paid by them.

As compensation for their management services, the Manager is entitled to (i) an annual Management Fee, payable monthly, equal to 2.5% of the total capital contributions made by the Fund’s shareholders and (ii) a 15% interest in the cash distributions made to the Fund’s shareholders. The Manager received from the Fund for its management services $2.4 million for the year ended December 31, 2006. There have been no cash distributions to shareholders paid through December 31, 2006. Effective January 1, 2007, the Manager has changed its policy regarding the annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month, based upon dry-hole expenses of $26.8 million through December 31, 2006.

Business Strategy

The Fund’s primary investment objective is to generate cash flow from the acquisition, exploration, production and sale of crude oil and natural gas from oil and natural gas projects. The Fund has invested and participates in exploration and production projects located in the waters of the Gulf of Mexico offshore Texas, Louisiana and Alabama on the Outer Continental Shelf (“OCS”). These activities are governed by the Outer Continental Shelf Lands Act

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(“OCSLA”) enacted in 1953 and administered by the Mineral Management Services (“MMS”). The Fund generally looks to invest in projects that have been proposed by larger independent oil and natural gas companies seeking to minimize their risks by selling a portion of their interest in a project. These investments may require the Fund to pay a disproportionate part of the drilling costs on the exploratory well of a project than its ownership interest would otherwise require. This is called a promote and is common in the oil and natural gas exploration industry. In addition, notwithstanding the sale of an interest to the Fund, the seller may retain a right for some period of time to payments from sales of oil and natural gas production from a well or project. This is called an overriding interest which is also common in this industry. Notwithstanding any such promote or overriding interest, the Fund has tried to invest in projects that it believes contain sufficient commercial quantities of oil or natural gas and which are near (i) existing oil or natural gas gathering and processing infrastructure and (ii) developed markets where the Fund can sell its oil or natural gas.

The Fund tries to focus on projects that have significant reserve potential and which are projected to have the shortest time period from investment to first production. The Fund does not operate these projects, and although it has a vote, it is not in control of the schedule pursuant to which its projects are developed and completed. Moreover, when performing due diligence with respect to a project, the Fund must rely on the independent reservoir engineers who are hired and paid, in most cases, by the operator. The Fund does engage certain consultants to examine and review such reserve estimates and seismic information on its behalf.

Manager’s Investment Committee and Investment Criteria

The New Jersey office has four executives on the investment committee, three of whom have been working together at Ridgewood Energy for 20 years. The Houston office, which opened in 2003, has five executives on the investment committee who provide operational, scientific and technical oil and gas expertise. In considering projects, the Manager and investment committee investigates each such project against a list of factors that it believes will result in the selection of those projects that have the highest probability of success. These factors, in no particular order, include, but are not limited to, the following (i) targeting projects that have or are expected to have operators with significant resources and experience in oil and gas exploration; (ii) targeting projects that have or are expected to have partners that also have significant resources and experience in oil and gas exploration; (iii) technical quality of the project including its geology, seismic profile, locational trends, and whether the project has potential for multiple prospects; (iv) oil or gas reserve potential; (v) whether and the extent to which the operator participates as a working interest owner in the project; (vi) economic factors, such as potential revenues from the project, the rate of return, and estimated time to first production; (vii) risk factors associated with exploration, as more fully described in this filing; (viii) existence of drilling rigs, platforms and other infrastructure, at or nearby the Project; (ix) proposed drilling schedule; (x) terms of the proposed transaction, including contractual restrictions and obligations and lease term; and (xi) overall cost of the project.

Properties

The following table is a summary of the Fund’s investments detailing the actual dollars spent in millions on each project. The total spent on dry-holes represents the total amount spent on each project through December 31, 2006 and subsequently written off. Copies of the Fund's participation agreements are attached hereto as exhibits.

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				Off-shore
				Location in		Drilling		Total Spent
		Working		Gulf of		Risk (b)		12/31/2006
	Lease Block	Interest	Operator	Mexico		(in thousands)		(in thousands)	Status
Dry holes (a)
	Viosca Knoll 207	40.0%	Chevron U.S.A. Inc.	Alabama		N/A	$	6,846	Dry - December 2006
	Garden Banks 346/390	27.0%	Walter Oil & Gas, Inc.	Texas	$	20,537	$	19,937	Dry - March 2007
Current Projects
	Vermilion 344 #2	22.5%	LLOG Exploration Offshore, Inc.	Louisiana	$	1,500	$	411	Successful 1Q 2007- completion in progress
	Main Pass 275 A3	30.0%	Newfield Exploration Company	Louisiana	$	2,850	$	200	Successful 1Q 2007- completion in progress
	West Cameron 75	20.0%	El Paso Inc.	Louisiana	$	9,625	$	-	Currently drilling - results expected in June 2007
	West Delta 68	22.5%	LLOG Exploration Offshore, Inc.	Louisiana	$	1,950	$	-	Successful 1Q 2007- completion in progress
Future projects
	Galveston 248	22.5%	LLOG Exploration Offshore, Inc.	Texas	$	2,400	$	-	2nd quarter 2007 drilling date
	West Delta 67	22.5%	LLOG Exploration Offshore, Inc.	Louisiana	$	1,800	$	-	2nd quarter 2007 drilling date
	Ship Shoal 81	22.5%	LLOG Exploration Offshore, Inc.	Louisiana	$	1,500	$	-	3rd quarter 2007 drilling date
	South Marsh Island 111	22.5%	LLOG Exploration Offshore, Inc.	Louisiana	$	1,500	$	-	2nd quarter 2007 drilling date

(a)	Dry-hole costs represent wells that have been drilled but do not have commercially productive oil and/or natural gas reservoirs and have been plugged and abandoned.
(b)	Drilling risk represents the estimated projected dry-hole costs, leasehold costs or sunk costs including promote for project participation per AFE's adjusted for current operating conditions (i.e. projected costs overruns, increased drilling rates, etc).

Working Interest in Oil and Natural Gas Leases

Existing projects, and future projects, if any, are expected to be located in the waters of the Gulf of Mexico offshore from Texas, Louisiana and Alabama on the OCS. The OCSLA, which was enacted in 1953, governs certain activities with respect to working interests and the exploration of oil and natural gas in the OCS.

Under OCSLA, the United States federal government has jurisdiction over oil and natural gas exploration and development on the OCS. As a result, the United States Secretary of the Interior is empowered to sell exploration, development and production leases of a defined submerged area of the OCS, or a block, through a competitive bidding process. Such activity is conducted by the MMS, an agency of the United States Department of Interior. As part of the leasing activity and as required by the OCSLA, the leases auctioned include specified lease terms such as the length of the lease, the amount of royalty to be paid, lease cancellation and suspension, and, to a degree, the planned activities of exploration and production to be conducted by the lessee. In addition, the OCSLA grants the Secretary of the Interior continuing oversight and approval authority over exploration plans throughout the term of the lease.

The winning bidder(s) at the lease sale, or the lessee(s), are given a lease by the MMS that grants such lessee(s) the exclusive right to conduct oil and natural gas exploration and production activities within a specific lease block, or working interest. Leases in the OCS are generally issued for a primary lease term of 5, 8 or 10 years depending on the water depth of the lease block. The 5-year lease term is for blocks in water depths generally less than 400 meters,

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8 years for depths between 400 meters to 800 meters and 10 years for depths in excess of 800 meters. During this primary lease term, except in limited circumstances, lessees are not subject to any particular requirements to conduct exploratory or development activities. However, once a lessee drills a well and begins production, the lease term is extended for the duration of commercial production.

The lessee of a particular block, for the term of the lease, has the right to drill and develop exploratory wells and conduct other activities throughout the block. If the initial well on the block is successful, a lessee (or third-party operator for a project) may conduct additional geological studies and may determine to drill additional or development wells. If a development well is to be drilled in the block, each lessee owning working interests in the block must be offered the opportunity to participate in, and cover the costs of, the development well up to that particular lessee's working interest ownership percentage.

Generally, working interests in an offshore gas lease under the OCSLA pay a 16.67% royalty to the MMS. Therefore, the net revenue interest of the holders of 100% of the working interest in the projects in which the Fund will invest is approximately 83.33% of the total revenue of the project, and, is further reduced by any other royalty burdens that apply to a lease block. However, as described below, the MMS has adopted royalty relief for existing OCS leases for those who drill deep oil and natural gas projects.

Mineral Management Services Deep Natural Gas Royalty Incentive

On January 26, 2004, the MMS promulgated a rule providing incentives for companies to increase deep oil and natural gas production in the Gulf of Mexico (the "Royalty Relief Rule"). Under the Royalty Relief Rule, lessees will be eligible for royalty relief on their existing leases if they drill and perforate wells for new and deeper reserves at depths greater than 15,000 feet subsea. In addition, an even larger royalty relief would be available for wells drilled and perforated deeper than 18,000 feet subsea. It should be noted that the Royalty Relief Rule does not extend to deep waters of the Gulf of Mexico off the continental shelf nor does it apply if the price of natural gas exceeds $9.91 Million British Thermal Units (“mmbtu”). The Royalty Relief Rule is limited to leases in a water depth less than 656 feet, or 200 meters. With respect to the Fund's projects that are currently drilling, the Fund will determine once completed if the project will be able to claim relief under the Royalty Relief Rule.

Oil and Natural Gas Agreements

None of the Fund's projects are producing and therefore no definitive arrangements have been made for the sale or transportation of oil and natural gas that may be produced from the Fund's projects. The Manager believes however, that it is likely that oil and natural gas from the Fund’s other projects will have access to pipeline transportation and can be marketed in a similar fashion. All of the Fund’s current projects are near existing transportation infrastructure and pipelines. As mentioned above in Manager’s Investment Committee and Investment Criteria, as part of the Manager’s review of a potential project, access to existing transportation infrastructure is an extremely important factor as the existence of such infrastructure enables production from a successful well to get to market quickly.

Operator

The projects in which the Fund has invested are operated and controlled by unaffiliated third-party entities acting as operators. The operator is responsible for drilling, administration and production activities for leases jointly owned by working interest owners and acts on behalf of all working interest owners under the terms of the applicable offshore operating agreements. In certain circumstances, operators will enter into agreements with independent third-party subcontractors and suppliers to provide the various services required for operating leases. Currently, the Fund's projects are operated by El Paso Inc., Newfield Exploration Company, and LLOG Exploration Offshore, Inc.

Because the Fund does not operate any of the projects in which it has acquired an interest, shareholders must not only bear the risk that the Manager will be able to select suitable projects, but also that, once selected, such projects will be managed prudently, efficiently and fairly by the operators.

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Insurance

The Manager has obtained hazard, property, general liability and other insurance in commercially reasonable amounts to cover the projects, as well as general liability and similar coverage for its business operations. However, there is no assurance that such insurance will be adequate to protect the Fund from material losses related to the projects. In addition, the Manager's past practice has been to obtain insurance as a package that is intended to cover most, if not all, of the funds under its management. While the Manager believes it has obtained adequate insurance in accordance with customary industry practices, the possibility exists, depending on the extent of the incident, insurance coverage may not be sufficient to cover all losses. In addition, depending on the extent, nature and payment of any claims to the Fund's affiliates, yearly insurance limits may become exhausted and be insufficient to cover a claim made by the Fund in that year.

Salvage Fund

As to projects in which the Fund owns a working interest, the Fund deposits in a separate interest-bearing account, or a salvage fund, which is in the nature of a sinking fund, money to help provide for the Fund’s proportionate share of the cost of anticipated salvage value of dismantling production platforms and facilities, plugging and abandoning the projects, and removing the platforms, facilities and projects in respect of each of such projects after their useful life, in accordance with applicable federal and state laws and regulations. There is no assurance that the salvage fund will have sufficient assets to meet these requirements and any unfunded expenses, and the Fund may be liable for such expenses. In 2006, the Fund deposited approximately $1 million from capital contributions into a salvage fund, which the Fund estimates to be sufficient to meet the Fund’s potential requirements. If management later determines the deposit and earned interest is not enough to cover the Fund’s proportionate share of expense, the Fund will deposit payments from operating income to make up any differences. Any portion of a salvage fund that remains after the Fund pays its share of the actual salvage cost will be distributed to the shareholders. There are no legal restrictions on the withdrawal of the salvage fund.

Seasonality

Generally, the Fund's business operations are not subject to seasonal fluctuations in the demand for oil and natural gas that would result in more of the Fund's oil and natural gas being sold, or likely to be sold, during one or more particular months or seasons. Once a project is drilled and reserves of oil and natural gas are determined to exist, the operator of the project extracts such reserves throughout the year. Oil and natural gas, once extracted, can be sold at any time during the year.

However, the Fund's drilling, production and transportation operations are subject to seasonal risks, such as hurricanes, that may affect the Fund’s ability to bring such oil or natural gas to the market and, consequently, affect the price for such oil and natural gas. The National Hurricane Center defines hurricane season in the Atlantic Region, Caribbean, and Gulf of Mexico to be from June 1 through November 30. During hurricane season, the number and intensity of and resulting damage from hurricanes in the Gulf of Mexico region could affect the gathering and processing infrastructure, drilling platforms or the availability or price of repair or replacement equipment. As a result, these factors may affect the supply and, consequently, the price of oil and natural gas resulting in an increase in price if supplies are reduced. However, even if commodity prices increase because of weather related shortages, the Fund may not be in a position to take immediate advantage of any such price increase if, as a result of such weather related incident, damage occurred to its projects, the gathering infrastructure or in the transportation network.

The Manager has had past experiences which indicate the typical interruption in operations resulting from a hurricane that does not result in significant damage may be approximately three to seven days. The Manager has experienced the range of possible interruptions in operations due to hurricanes from as little as no damage and insignificant or no interruptions to significant damage and extended interruptions. However, it is of course impossible to predict whether and to what extent hurricanes and damage may occur and to what projects.

Customers

The Fund's existing projects have not yet been developed to the point where reserves of oil and natural gas have been discovered or extracted. As a result, the Fund has not yet contracted with third parties to sell such oil and natural gas and therefore has no customers or any one customer upon which it depends for more than ten percent (10%) of the Fund’s revenues.

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Competition

Strong competition exists in the acquisition of oil and natural gas leases and in all sectors of the oil and natural gas exploration and production industry. Although the Fund does not compete for the acquisition of working interests from the MMS, it does compete with other companies for the acquisition of percentage ownership interests in oil and natural gas working interests in the secondary market.

In many instances, the Fund competes for projects with large independent oil and natural gas producers who generally have significantly greater access to capital resources, have a larger staff, and more experience in oil and natural gas exploration and production than the Fund. As a result, these larger companies are in a position that they could outbid the Fund for a project. However, because these companies are so large and have such significant resources, they tend to focus more on projects that are larger, have greater reserve potential, but cost significantly more to explore and develop. These larger projects increasingly tend to be projects in the deepwater areas of the Gulf of Mexico and the North Sea off the coast of Great Britain. However, the focus of these companies on larger projects does not necessarily mean that they will not investigate and/or acquire smaller projects in shallow waters for which the Fund competes. Many of these larger companies have participated in the auctions for lease blocks directly from the U.S. Government. In such cases, these companies obtain from the U.S. Government 100% of the leasehold of a particular lease block in the Gulf of Mexico. In order to obtain even more resources to invest in other larger and more expensive projects, they diversify current holdings, including projects they own in the shallow waters of the Gulf of Mexico, by selling off percentage interests in these lease blocks. As a result, very good projects in the shallow waters of the Gulf of Mexico become available. The Fund, therefore, has opportunities to acquire interests in these smaller, yet economically attractive projects.

Employees

The Fund has no employees as the Manager operates and manages the Fund.

Offices

The Manager’s business offices are located at 947 Linwood Avenue, Ridgewood, NJ 07450, and its phone number is 800-942-5550. The Manager also leases additional office space at 11700 Old Katy Road, Houston, TX 77079.

Regulations

Oil and natural gas exploration, development and production activities are subject to extensive federal and state laws and regulations. Regulations governing exploration and development activities require, among other things, the Fund’s operators to obtain permits to drill projects and to meet bonding, insurance and environmental requirements in order to drill, own or operate projects. In addition, the location of projects, the method of drilling and casing projects, the restoration of properties upon which projects are drilled and the plugging and abandoning of projects are also subject to regulations.

Outer Continental Shelf Lands Act

The Fund’s projects are located in the offshore waters of the Gulf of Mexico on the OCS. The Fund’s operations and activities, therefore, are governed by, among other things, the OCSLA.

Under OCSLA, the United States federal government has jurisdiction over oil and natural gas development on the OCS. As a result, the United States Secretary of the Interior is empowered to sell exploration, development and production leases of a defined submerged area of the OCS, or a block, through a competitive bidding process. Such activity is conducted by the MMS, an agency of the United States Department of Interior. The MMS administers federal offshore leases pursuant to regulations promulgated under the OCSLA. Lessees must obtain MMS approval for exploration, development and production plans prior to the commencement of offshore operations. In addition, approvals and permits are required from other agencies such as the U.S. Coast Guard, the Army Corps of Engineers and the Environmental Protection Agency. Offshore operations are subject to numerous regulatory requirements, including stringent engineering and construction specifications related to offshore production facilities and pipelines and safety-related regulations concerning the design and operating procedures of these facilities and pipelines. MMS regulations also restrict the flaring or venting of production and proposed regulations would prohibit the flaring of liquid hydrocarbons and oil without prior authorization.

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The MMS has also imposed regulations governing the plugging and abandonment of wells located offshore and the installation and removal of all production facilities. Under certain circumstances, the MMS may require operations on federal leases to be suspended or terminated. Any such suspension or termination could adversely affect the Fund’s operations and interests.

The MMS conducts auctions for lease blocks of submerged areas offshore. As part of the leasing activity and as required by the OCSLA, the leases auctioned include specified lease terms such as the length of the lease, the amount of royalty to be paid, lease cancellation and suspension, and, to a degree, the planned activities of exploration and production to be conducted by the lessee. In addition, the OCSLA grants the Secretary of the Interior continuing oversight and approval authority over exploration plans throughout the term of the lease.

Sales and Transportation of Natural Gas/Oil

The Fund expects to sell its proportionate share of oil and natural gas to the market and to receive market prices from such sales. These sales are not currently subject to regulation by any federal or state agency. However, in order for it to make such sales the Fund is dependent upon unaffiliated pipeline companies whose rates, terms and conditions of transport are subject to regulation by the Federal Energy Regulatory Commission ("FERC"). The rates, terms and conditions are regulated by FERC pursuant to a variety of statutes including the OSCLA, the Natural Gas Policy Act and the Energy Policy Act of 1992. Generally, depending on certain factors, pipelines can charge rates that are either market-based or cost-of-service. In some circumstances, rates can be agreed upon pursuant to settlement. Thus, the rates that pipelines charge us, although regulated, are beyond the Fund’s control. Nevertheless, such rates would apply uniformly to all transporters on that pipeline and, as a result, the impact to the Fund of any changes in such rates, terms or conditions would not impact its operations differently in any material way than the impact upon other oil or natural gas producers and marketers.

Environmental Matters and Regulation

The Fund’s operations are subject to pervasive environmental laws and regulations governing the discharge of materials into the air and water and the protection of aquatic species and habitats. However, although it shares the liability along with its other working interest owners for any environmental damage, most of the activities to which these environmental laws and regulations apply are conducted by the operator on the Fund’s behalf. Nevertheless, environmental laws and regulations to which its operations are subject may require the Fund, or the operator, to acquire permits to commence drilling operations, restrict or prohibit the release of certain materials or substances into the environment, impose the installation of certain environmental control devices, require certain remedial measures to prevent pollution and other discharges such as the plugging of abandoned projects and, finally, impose in some instances severe penalties, fines and liabilities for the environmental damage that is caused by the Fund’s projects.

Some of the environmental laws that apply to oil and natural gas exploration and production are:

The Oil Pollution Act. The Oil Pollution Act ("OPA") amends Section 311 of the Federal Water Pollution Act (the “Clean Water Act”) and was enacted in response to the numerous tanker spills, including the Exxon Valdez that occurred in the 1980s. Among other things, the OPA clarifies the federal response authority to and increases penalties for spills. The OPA establishes a new liability regime for oil pollution incidents in the aquatic environment. Essentially, the OPA provides that a responsible party for a vessel or facility from which oil is discharged or which poses a substantial threat of a discharge could be liable for certain specified damages resulting from a discharge of oil, including clean-up and remediation, loss of subsistence use of natural resources, real or personal property damages, as well as certain public and private damages. A responsible party includes a lessee of an offshore facility.

The OPA also requires a responsible party to submit proof of its financial responsibility to cover environmental cleanup and restoration costs that could be incurred in connection with an oil spill. Under the OPA, parties responsible for offshore facilities must provide financial assurance of at least $35 million to address oil spills and associated damages. In certain limited circumstances, that amount may be increased to $150 million. As indicated earlier, the Fund has not been required to make any such showing to the MMS as the operator is responsible for such compliance. However, notwithstanding the operator's responsibility for compliance, in the event of an oil spill, the Fund, along with the operator and other working interest owners, could be liable under the OPA for the resulting environmental damage.

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Federal Water Pollution Act/Clean Water Act. Generally, the Federal Water Pollution Act/Clean Water Act imposes liability for the unauthorized discharge of petroleum products into the surface and coastal U.S. waters except in strict conformance with discharge permits issued by the federal (or state if applicable) agency. Regulations governing water discharges also impose other requirements, such as the obligation to prepare spill response plans. Again, the Fund’s operators are responsible for compliance with the Clean Water Act although the Fund may be liable for any failure of the operator to do so.

Federal Clean Air Act. The Federal Clean Air Act restricts the emission of certain air pollutants. Prior to constructing new facilities, permits may be required before work can commence and existing facilities may be required to incur additional capital costs to add equipment to ensure and maintain compliance. As a result, the Fund’s operations may be required to incur additional costs to comply with the Clean Air Act.

Other Environmental Laws. In addition to the above, the Fund’s operations may be subject to the Resource Conservation and Recovery Act, which regulates the generation, transportation, treatment, storage, disposal and cleanup of certain hazardous wastes, as well as the Comprehensive Environmental Response, Compensation and Liability Act which imposes joint and several liability without regard to fault or legality of conduct on classes of persons who are considered responsible for the release of a hazardous substance into the environment.

The above represents a brief outline of the major environmental laws that may apply to the Fund’s operations. The Fund believes that its operators are in compliance with each of these environmental laws and the regulations promulgated there under.

Potential Tax Benefits

The following discussion is a summary of the primary tax benefits of ownership of a membership interest in the Fund and does not include all possible tax benefits or other tax implications of such ownership.

Deduction of Intangible Drilling and Development Costs

Section 263(c) of the Internal Revenue Code of 1986, as amended (the “Code”) authorizes an election by the Fund to deduct as expenses intangible drilling and development costs incurred in connection with oil and natural gas properties at the time such costs are incurred in accordance with the Fund's method of accounting, provided that the costs are not more than would be incurred in an arm's length transaction with an unrelated drilling contractor. Such costs include, for example, amounts paid for labor, fuel, wages, repairs, supplies and hauling necessary to the drilling of the project and preparation of the project for production. Generally, this election applies to items that in themselves do not have salvage value. Alternatively, each Fund shareholder may elect to capitalize their share of the intangible drilling and development costs and amortize them ratably over a 60-month period.

The Fund may enter into “carried interest” arrangements whereby the Fund would purchase interests in certain leases and agree to pay a disproportionate part of the costs of drilling the first project thereon. In such situations, the party who is paying more than their share of costs of drilling may not deduct all such costs as intangible drilling and development costs unless their percentage of ownership of the lease is not reduced before they have recovered from the first production of the project an amount equal to the cost they incurred in drilling, completing, equipping and operating the project. The Fund may not have this right in certain of the transactions of this type in which it may engage. If circumstances permit, however, the Fund will adopt the position that all of the intangible drilling and development costs incurred are deductible (even though such costs may be disproportionate to its ownership of the lease) on the basis that such arrangements constitute partnerships for federal income tax purposes and that the excess intangible drilling and development costs are specifically allocable to the Fund. There can be no assurance that this position would prevail against challenge by the Internal Revenue Service (“IRS”).

In the case of a shareholder who constitutes an integrated oil company, 30% of the amount otherwise allowable as a deduction for intangible drilling costs under Section 263(c) must be capitalized and deducted ratably over a 60-month period beginning with the month the costs are paid or incurred. This provision does not apply to nonproductive projects. For this purpose, an integrated oil company is generally defined as an individual or entity with retail sales of oil and natural gas aggregating more than $5 million and refining more than 50,000 barrels per day for the taxable year.

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To the extent that drilling and development services were performed for the Fund in 2006, amounts incurred pursuant to bona fide arm's-length drilling contracts and constituting intangible drilling and development costs were deductible by the Fund in 2006. To the extent that such services are performed in 2007, however, the Fund will only be allowed to deduct for the year 2007 amounts that are:

·   incurred pursuant to bona fide arm's-length drilling contracts which provide for absolute noncontingent liability for payment, and

·   attributable to wells spud within 90 days after December 31, 2006.

Sections 461(h)(1) and 461(i)(2) of the Code provide, in relevant part:

...in determining whether an amount has been incurred with respect to any item during any taxable year, the all events tests shall not be treated as met any earlier than when economic performance with respect to such item occurs.

* * *

...economic performance with respect to the act of drilling an oil or natural gas well shall be treated as having occurred within a taxable year if drilling of the well commences before the close of the 90th day after the close of a taxable year.

The clear implication of these provisions is that an amount incurred during a taxable year for drilling or completion services which could otherwise be accrued for federal tax purposes will not be disqualified as a deduction merely because the services are performed during the subsequent taxable year (provided that the services commence within the first 90 days of such subsequent year).

Consequently, intangible drilling and development costs meeting the above criteria were deducted by the Fund in 2006 even though a portion of such costs are attributable to services performed during 2007.

Each shareholder, however, may deduct their share of amounts paid in 2006 for services performed in 2007 only to the extent of their cash basis in the Fund as of the end of 2006. For this purpose, a taxpayer's cash basis in a tax shelter which is taxable as a partnership (such as the Fund) is the taxpayer's basis in the Fund determined without regard to any amount borrowed by the taxpayer with respect to the Fund which (a) is arranged by the Fund or by any person who participated in the organization, sale or management of the Fund (or any person related to such person within the meaning of Section 461(b)(3)(c)) of the Code, or (b) is secured by any asset of the Fund. Inasmuch as cash basis excludes borrowing arranged by an extremely broad group of persons who could be related to a person who participated in the organization, sale or management of the Fund, it is not possible to express an opinion as to whether each shareholder of the Fund will be allowed to deduct their allocable share of any prepaid drilling expenses to the extent that they exceed their actual cash investment in the Fund.

Depletion Deductions

Subject to the limitations discussed hereafter, the shareholders will be entitled to deduct, as allowances for depletion under Section 611 of the Code, their share of percentage or cost depletion, whichever is greater, for each oil and natural gas producing project owned by the Fund.

Cost depletion is computed by dividing the basis of the project by the estimated recoverable reserves to obtain a unit cost, then multiplying the unit cost by the number of units sold in the current year. Cost depletion cannot exceed the adjusted basis of the project to which it relates. Thus, cost depletion deductions are limited to the capitalized cost of the project, while percentage depletion may be taken as long as the project is producing income. The depletion allowance for oil and natural gas production will be computed separately by each shareholder and not by the Fund. The Fund will allocate to each shareholder their proportionate share of production and the adjusted basis of each Fund project. Each shareholder must keep records of their share of the adjusted basis and any depletion taken on the project and use their adjusted basis in the computation of gain or loss on the disposition of the project by the Fund.

Percentage depletion with respect to production of oil and natural gas is available only to those qualifying for the independent producer's exemption, and is limited to an average of 1,000 barrels per day of domestic oil production or 6,000,000 cubic feet per day of domestic natural gas production. The applicable rate of percentage depletion on production under the independent producer exemption is 15% of gross income from oil and natural gas sales. The depletion deduction under the independent producer exemption may not exceed 65% of the taxpayer's taxable income for the year, computed without regard to certain deductions. Any percentage depletion not allowed as a deduction due to the 65% of adjusted taxable income limitation may be carried over to subsequent years subject to the same annual limitation. For a shareholder that is a trust, the 65% limitation shall be computed without deduction for distributions to beneficiaries during the taxable year.

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The determination of whether a shareholder will qualify for the independent producer exemption will be made at the shareholder level. A shareholder who qualifies for the exemption, but whose average daily production exceeds the maximum number of barrels on which percentage depletion can be computed for that year, will have to allocate their exemption proportionately among all of the properties in which they have an interest, including those owned by the Fund. In the event percentage depletion is not available, the shareholder would be entitled to utilize cost depletion as discussed above.

The independent producer exemption is not available to a taxpayer who refines more than 50,000 barrels of oil on any one day in a taxable year or who directly or through a related person sells oil or natural gas or any product derived therefrom (i) through a retail outlet operated by them or a related person or (ii) to any person who occupies a retail outlet which is owned and controlled by the taxpayer or a related person. In general, a related person is defined by Section 613A of the Code as a corporation, partnership, estate, or trust in which the taxpayer has a 5% or greater interest. For the purpose of applying this provision: (a) bulk sales of oil or oil and natural gas to commercial or industrial users are excluded from the definition of retail sales; (b) if the taxpayer or a related person does not export any domestic oil or natural gas production during the taxable year or the immediately preceding year, retail sales outside the U.S. are not deemed to be disqualifying sales; and (c) if the taxpayer's combined receipts from disqualifying sales do not exceed $5.0 million for the taxable year of all retail outlets taken into account for the purpose of applying this restriction, such taxpayer will not be deemed a retailer.

Depreciation

Costs of equipment, such as casing, tubing, tanks, pumping units, pipelines, production platforms and other types of tangible property and equipment generally cannot be deducted currently, but may be eligible for accelerated cost recovery. All or part of the depreciation claimed may be subsequently recaptured upon disposition of the property by the Fund or of a share by any shareholder.

In addition, the Code provides for certain uniform capitalization rules which could result in the capitalization rather than deduction of Fund management fee and administration costs.

ITEM 1A. RISK FACTORS

In addition to the other information set forth elsewhere in this report, you should carefully consider the following factors when evaluating the Fund:

RISKS INHERENT IN THE FUND’S BUSINESS

The Fund’s exploration and production activities are subject to risks that it cannot control and it may have insufficient insurance to cover these risks. To the extent the fund is not covered by insurance, it could incur losses and liabilities which could reduce revenues, increase costs or eliminate dollars available for future exploration and development projects.

Costs of drilling, completing and operating projects are often uncertain and drilling operations may be curtailed, delayed or canceled as a result of a variety of factors including:

·   Fires, explosions, blowouts and cratering

·   Equipment failures, casing collapse, pipe and cement failures

·   Marine risks such as capsizing or collisions

·   Adverse weather conditions, including hurricanes

·   Shortages or delays in the delivery of equipment

·   Acts of terrorism

·   Environmental hazards

·   Pipeline ruptures and discharge of toxic gases

Many of the above-mentioned risks could result in damage to life and / or property, or cause sustained interruption of production.

Insurance to cover certain of these risks may be prohibitively expensive or unavailable, particularly with respect to acts of terrorism. Additionally, insurance coverage may not be sufficient to cover certain catastrophic events. The Fund could be liable for costs in excess of its insurance coverage.

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In addition, it is significantly less costly for insurance to be acquired and maintained by the Manager as a package that covers all of the oil and natural gas projects under its management. The majority of these projects are owned by other entities that are likewise managed by Ridgewood Energy. As a result, given insurance limits, if significant damage occurs to other projects owned by other investment vehicles managed by the Manager in any given year, the amount of insurance available to cover any damage to the Fund's projects could be significantly reduced.

The Fund’s investment activities may result in unsuccessful projects.

There is always significant risk that a project will not have commercially productive oil or natural gas reservoirs. In other words, the well may be a dry-hole. The successful acquisition of producing properties requires assessment of reserves, seismic and other engineering information, future commodity prices, operating costs and potential environmental liabilities. The Fund’s assessment of these factors may not be successful.

The Fund has already experienced dry-holes and further dry-holes will adversely impact the Fund’s profitability and returns.

The Fund has already had two dry holes. Cumulative dry-hole costs to the Fund for the year ended December 31, 2006 totaled approximately $26.8 million. Given that the Fund’s capital is limited to the amount it raised (less various fees) in the offering of its shares, the aforementioned dry-holes, and every other dry-hole that the Fund may experience, has the effect of reducing the limited capital available for investment. In addition, because dry-holes reduce the capital available for additional investment, a significant number of dry-holes will reduce the returns of the Fund because the remaining capital, even if invested in successful wells, may not generate enough cash for investors to see significant or positive returns on their investments.

The actual costs to drill a well, or dry-hole costs, can materially exceed estimates due to cost overruns. In such event, the risks associated with the well increase.

When the Fund invests in a particular project the operator will generally provide what is referred to as an “AFE” or “authorization for expenditures”. The AFE’s for a particular project generally represent the dry-hole costs associated with that project and not the development costs should the project be successful. Dry-hole costs are generally an estimate made by the Operator after considering numerous factors, such as water depth, drilling depth, seismic information, and equipment costs and availability. Notwithstanding the Operator’s best estimates of drilling cost, the actual drilling of the well may result in cost overruns that materially increase the costs of drilling the project. The cost overruns can occur for any number of reasons including but not limited to, weather delays, equipment unavailability, pressure or irregularities in formations and other risks identified herein. The Fund has little choice but to pay these costs overruns or potentially lose its right to participate in the well by going “non-consent”. Significant cost overruns will increase the risk associated with the project as additional Fund capital that would otherwise be used for other projects is being allocated to cover the overruns.

The Fund’s reserve estimates are inherently uncertain and may be inaccurate and if so, may adversely affect the Fund’s revenue and profitability.

Once reserves are proved, there are many uncertainties inherent in estimating quantities of proved reserves and in projecting future rates of production and timing of development expenditures, including many factors beyond the Fund’s control. Estimates of reserves by necessity are projections based on engineering and geological data, including but not limited to volumetrics, reservoir size, reservoir characteristics, the projection of future rates of production and the timing of future expenditures. The accuracy of any reserve estimate is a function of the amount and quality of available data and of engineering and geological interpretation and judgment. As a result, estimates of different engineers normally vary and may not be accurate. Development of the Fund’s reserves may not occur as scheduled and the actual results may not be as estimated.

In addition, results of drilling, testing and production subsequent to the date of an estimate may justify revision of such reserve and cost estimate upward or downward. Accordingly, reserve estimates are often different, sometimes materially, from the quantities ultimately recovered. The Manager reviews the reserve estimates provided by the operators of projects in which the Fund participates and may retain independent reserve engineers to review such reserve estimates and/or conduct an independent review, as appropriate. Future performance that deviates significantly from reserve estimates could have a material effect (positive or negative) on the Fund’s operations, business and prospects, as well as on the amounts of such reserves.

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Moreover, the Fund's estimated or proved oil and natural gas reserves and the estimated future net revenues from such reserves will be based upon various assumptions, including available geological, geophysical, engineering and production data. The process also requires certain economic assumptions such as oil and natural gas prices, drilling and operating expenses, capital expenditures, and availability of funds. As a result, the Fund is required to make assumptions and judgments, all of which can be wrong or inaccurate. Thus, these estimates are inherently imprecise and the quality and reliability of this information can vary, perhaps significantly, from actual results.

The prices that the Fund may receive for its oil or natural gas are highly volatile and unpredictable and may not be sufficient to generate enough cash flow to make distributions to investors.

When oil and natural gas production begins, the Fund's revenue, profitability and cash flow are highly dependent on the prices of oil and natural gas. Historically, the markets for crude oil and natural gas have been extremely volatile, and they are likely to continue to be volatile in the future. This volatility is caused by numerous factors and market conditions. Therefore, it is impossible to predict the future price of crude oil and natural gas with any certainty. Low commodity prices could have an adverse affect on the Fund’s future profitability and, in such an event, the Fund may be required by accounting rules to write down the carrying value of the Fund’s projects.

The Fund has not engaged in any price risk management programs or hedges to date and does not anticipate engaging in those types of transactions in the future.

The Fund may be required to take writedowns if natural gas and oil prices decline, which may adversely affect the Fund’s profitability.

The Fund may be required under successful efforts accounting rules to write down the carrying value of its properties if natural gas and oil prices decline or if the Fund has substantial downward adjustments to its estimated proved reserves, increases in the Fund’s estimates of development costs or deterioration in the Fund’s exploration results.

The Fund utilizes the successful efforts method of accounting for natural gas and oil exploration and development activities. If the net book value of its natural gas and oil properties exceeds its undiscounted cash flows, GAAP requires the Fund to impair or “writedown” the book value of its natural gas and oil properties. Depending on the magnitude of any future impairment, a writedown could significantly reduce the Fund’s income, or produce a loss. As impairment computations involve the prevailing price on the last day of the quarter, it is impossible to predict the timing and magnitude of any future impairment. To the extent the Fund’s finding and development costs continue to increase as the Fund expects, the Fund will become more susceptible to impairments in low price environments.

The unavailability and cost of needed equipment may adversely affect the Fund’s profitability and operations.

As a result of the increase in oil and natural gas prices, drilling activity in the Gulf of Mexico has increased significantly. Drilling rigs and other equipment have become harder to obtain and more costly to acquire, especially if weather occurrences, such as hurricanes, occur with frequency in the Gulf of Mexico. These circumstances could have a negative impact on the Fund's operations.

The Fund has a limited amount of capital available to invest and therefore has limited ability to invest in many more projects. Further, each unsuccessful project erodes the Fund’s limited capital.

The capital raised by the Fund in its private placement is more than likely all the capital it will be able to obtain for investments in projects. Given its structure, obtaining traditional financing from public markets is unlikely and it is not practical to assume the Fund can raise additional funds through a supplemental offering or through debt financing. As a result, it has little, if any, ability to grow its business beyond its current projects or through investing its available cash in new projects. In any event, the number of projects in which the Fund can invest will naturally be limited and each unsuccessful project the Fund experiences, if any, will not only reduce its ability to generate revenue, but also exhaust its limited supply of capital.

The Fund may incur costs to comply with the many environmental and other governmental regulations that apply to its operations, which may adversely impact its ability to generate cash flow for distributions.

The oil and natural gas industry, in general, and offshore activities, in particular, are subject to numerous governmental laws and regulations which may affect the ongoing and future operational decisions and financial results of the Fund. United States legislation affecting the oil and natural gas industry is under constant review for amendment and expansion. Also, numerous departments and agencies, both federal and state, are authorized by statute to issue and have issued rules and regulations which, among other things, require permits for the drilling of projects, impose construction, abandonment and remediation requirements, prevent the waste of natural gas and liquid hydrocarbons through restrictions on flaring, require drilling bonds and regulate environmental and safety matters. Additionally, governmental regulations may also impact the demand for oil and natural gas, which could adversely affect the price at which oil and natural gas is sold. The regulatory burden on the oil and natural gas industry increases its cost of doing business and, subsequently, affects its profitability. Finally, as additional legislation or amendments may be enacted in the future, the Fund is unable to predict the ultimate cost of compliance.

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The Fund relies on third parties to operate, manage and maintain its projects over which it has limited control. Therefore, decisions may be made by these third parties that adversely affect the Fund or its operations.

Neither the Fund nor the Manager currently own or have any plans to acquire drilling or production equipment nor does the Fund or Manager maintain a staff of technical employees required for on-site drilling operations. Therefore, the Fund must rely on unrelated third party operators to oversee and/or perform all drilling, completion and ongoing maintenance and production activities for the projects in which it participates. For example, lack of operating control could lead to higher operating costs, drilling delays, increased rig costs or labor issues. As such, the Fund has little or no control over the day-to-day operations of these projects. However, the Fund has acquired and will continue to seek projects, to the extent of its available capital, in which the operators have significant resources, are experienced in offshore operations and have a long term presence and track record of success in the Gulf of Mexico.

The Fund owns projects jointly with other companies over whom it has no control and who may influence the manner in which the project is operated.

The Fund participates in projects as a working interest owner along with other unrelated third party entities, including the operator. While the Manager may monitor and participate in decisions affecting exploration and development of the leases or projects in which the Fund participates, other decisions with respect to lease exploration and development activities may be controlled by the other participants and could be unfavorable to the Fund. Finally, the Fund could be held liable for the joint activity obligations or tortuous actions of the operator or other working interest owners. If the Fund’s co-participants fail to pay their portion of the drilling and completion or ongoing maintenance costs, the project may lack sufficient funds to perform such work. As a result, the Fund, as well as the remaining working interest owners, may be required to pay such additional sums in order to complete drilling or development of the project.

The Fund faces competition from larger entities with greater capital resources that could limit the number and availability of economically attractive projects.

As an independent oil and natural gas producer, the Fund faces competition in all aspects of its business. Many of its competitors are large, well-established companies that have significantly larger staffs and have greater capital resources. These companies may be able to pay more for a project or sustain losses for a longer period of time than the Fund.

The Fund maintains a salvage fund that may be insufficient to cover such salvage costs, in which event the Fund could be liable for any excess.

The Fund has created a salvage fund to cover certain anticipated salvage costs associated with the Fund’s projects. The salvage fund may not have sufficient assets to meet salvage costs and thus the Fund may be liable for its proportionate share of the unfunded expenses if in excess of the salvage fund.

The Fund’s projects and operations are located exclusively in the Gulf of Mexico and are subject to interruptions and damage from hurricanes that could adversely affect the Fund’s cash flow due to such exclusivity.

The Fund has invested in projects exclusively within the Gulf of Mexico and any future investments by the Fund in projects will likewise be located in the Gulf of Mexico. As a result of such exclusivity in location, the Fund is particularly susceptible to hurricane risks in that the impact to the Fund’s operations of a severe storm or storms could be more pronounced and severe (depending on the storm, its path, and resulting damage) because the Fund does not have projects in other areas of the globe to offset such damage. If, for example, the Fund had projects in areas not affected by hurricanes those projects could still operate and generate cash flow during the interruptions in operations in the Gulf of Mexico. As it is, a hurricane, or series of hurricanes in a season, has the potential of interrupting all of the Fund’s operations, at least for some period of time, if all of the Fund’s projects were affected. In such event, the Fund would not have sufficient cash flow to make distributions to investors and, additionally and as disclosed earlier, insurance may not be sufficient to cover all of the damages caused by the hurricanes.

The Fund’s internal control over financial reporting could be adversely affected by material weaknesses in the Fund’s internal controls.

Investors should be aware that the Fund cannot guarantee that material weaknesses will not develop or be identified. Any material weaknesses identified could harm the Fund’s operating results, cause the Fund to fail to meet its reporting obligations or result in material misstatements in its financial statements. Any such failure also could affect the ability of management to certify that the Fund’s internal controls are effective when it provides an assessment of the Fund’s internal control over financial reporting.

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RISKS RELATED TO THE NATURE OF THE FUND’S SHARES

The Fund’s shares have severe restrictions on transferability and liquidity and shareholders are required to hold the shares for a long period of time.

The Fund's shares are illiquid investments. There is currently no market for these shares. Because there will be a limited number of persons who purchase shares and because there are significant restrictions on the transferability of such shares under the limited liability company agreement (“LLC agreement”) and under applicable federal and state securities laws, it is expected that no public market will develop. Moreover, neither the Fund nor the Manager will provide any market for the shares. Shareholders are generally prohibited from selling or transferring their shares except in the circumstances permitted under the LLC agreement and applicable law, and all such sales or transfers require the Fund's consent, which it may withhold at its sole discretion. Accordingly, shareholders have no assurance that an investment can be transferred and must be prepared to bear the economic risk of the investment indefinitely.

Shareholders are not permitted to participate in the Fund’s management or operations and must rely exclusively on the Manager.

Shareholders have no right, power or authority to participate in the Fund’s management or decision making or in the management of the Fund’s projects. The Manager has the exclusive right to manage, control and operate the Fund’s affairs and business and to make all decisions relating to its operation.

The Fund’s assets are illiquid and therefore, cash flow for distributions, if any, must come from operations and not from dispositions of assets.

The Fund's interest in projects is illiquid. It does not anticipate selling any interests in the projects, or any part thereof. Even if it elected to sell, it is likely that there will be little or no market for these assets. However, if the Fund were to attempt to sell any such interest, a successful sale would depend upon, among other things, the operating history and prospects for the project or interest being sold, proven oil and natural gas reserves, the number of potential purchasers and the economics of any bids made by them and the current economics of the oil and natural gas market. In addition, any such sale may result in adverse tax consequences to the shareholders. The Manager has full discretion to determine whether any project, or any partial interest, should be sold. Consequently, shareholders will depend on the Manager for the decision to sell all or a portion of a project, or retain it, for the benefit of the shareholders.

The Fund indemnifies its officers, as well as the Manager and its employees, for certain actions taken on its behalf and therefore fund assets may be used to reimburse such officers.

The LLC agreement provides that the Fund's officers and agents, the Manager, the affiliates of the Manager and their respective directors, officers and agents when acting on behalf of the Manager or its affiliates on the Fund's behalf, will be indemnified and held harmless by the shareholders from any and all claims rising out of the Fund's management, except for claims arising out of bad faith, gross negligence or willful misconduct or a breach of the LLC agreement. Therefore, the Fund may have difficulty sustaining an action against the Manager, or its affiliates and their officers based on breach of fiduciary responsibility or other obligations to the shareholders.

The Manager will receive a management fee regardless of the Fund’s profitability and, additionally, cash distributions.

The Manager is entitled to receive an annual management fee from the Fund regardless of whether the Fund is profitable in that year. The annual fee, payable monthly, is equal to 2.5% of total capital contributed by shareholders. For the year ended December 31, 2006, the management fee was $2.4 million. Effective January 1, 2007, the Manager has changed its policy regarding the annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month, based upon dry-hole expenses of $26.8 million through December 31, 2006.

In addition to its annual management fee, the Manager will receive 15% of the Fund’s cash distributions to shareholders although the Manager has not contributed any cash to the Fund. Accordingly, shareholders contribute all of the cash utilized for the Fund's investments and activities. If the Fund's projects are unsuccessful, the shareholders lose 100% of their investment while the Manager, not having contributed any capital, will lose nothing.

Inherent in these fee arrangements is the possibility of conflicts between the Fund's interests and the best interests of the Manager. The Manager may have incentive to act in its best interests rather than in the Fund’s best interest by taking actions designed to increase its fees but with significant risk to the Fund. Any such conflict of interests will be addressed by the Manager as described in the risk factor below headed “Because the Manager manages many other oil and natural gas funds, it may have conflicts of interest in its management of the Fund’s operations”.

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None of the compensation to be received by the Manager has been derived as a result of arm's length negotiations.

Under Delaware law, shareholders have limited access to information and therefore, the Fund and Manager can restrict certain information, including shareholder information, making communications with other shareholders difficult. As a result, the information you receive about the Fund and its activities will be limited to what the Manager chooses to provide.

Delaware law permits Delaware limited liability companies to restrict access to certain information provided that such restricted access is set forth in the LLC agreement. The Fund's LLC agreement contains provisions that limit shareholder access to certain sensitive or confidential information such as trade secrets, agreements or confidential or proprietary information. Moreover, shareholder access to information regarding other shareholders is likewise limited and the Fund may refuse to give shareholder information, such as name and address of other shareholders, which could make it difficult for a shareholder to contact other shareholders. Nevertheless, shareholders do have access to tax, other financial information or any other reasonable information regarding Fund operations.

Cash distributions are not guaranteed and may be less than anticipated or estimated.

Distributions depend primarily on available cash from oil and natural gas operations. At times, distributions may be delayed to repay the principal and interest on fund borrowings, if any, or to fund other costs, although the Fund does not anticipate such borrowings. The Fund's taxable income will be taxable to the shareholders in the year earned, even if cash is not distributed.

Because the Manager manages many other oil and natural gas funds, it may have conflicts of interest in its management of the Fund’s operations.

Shareholders will not be involved in the management of the Fund's operations. Accordingly, they must rely on the Manager's judgment in such matters. Inherent with the exercise of its judgment, the Manager will be faced with conflicts of interest. While neither the Fund nor the Manager have specific procedures in place in the event of any such conflicting responsibilities, the Manager recognizes that it has fiduciary duties to the Fund in connection with its position and responsibilities as Manager and it intends to abide by such fiduciary responsibilities in performing its duties. Therefore, the Manager and its affiliates will attempt, in good faith, to resolve all conflicts of interest in a fair and equitable manner with respect to all parties affected by any such conflicts of interest. The Manager is not liable to the Fund for how conflicts of interest are resolved unless it has acted in bad faith, or engaged in gross negligence or willful misconduct.

TAX RISKS ASSOCIATED WITH AN INVESTMENT IN SHARES

The Fund is organized as a Delaware limited liability company and the Manager intends to qualify the Fund as a partnership for federal tax purposes. The principal tax risks to shareholders are that:

·   The Fund may recognize income taxable to the shareholders but may not distribute enough cash to cover the income taxes on the Fund's taxable income.

·   The allocation of Fund items of income, gain, loss, and deduction may not be recognized for federal income tax purposes.

·   All or a portion of the Fund's expenses could be considered either investment expenses (which would be deductible by a shareholder only to the extent the aggregate of such expenses exceeded 2% of such shareholder's adjusted gross income) or as nondeductible items that must be capitalized.

·   All or a substantial portion of the Fund's income could be deemed to constitute unrelated business taxable income, such that tax-exempt shareholders could be subject to tax on their respective portions of such income.

·   If any Fund income is deemed to be unrelated business taxable income, a shareholder that is a charitable remainder trust could have all of its income from any source deemed to be taxable.

·   All or a portion of the losses, if any, allocated to the shareholders will be passive losses and thus deductible by the shareholder only to the extent of passive income.

·   The shareholders could have capital losses in excess of the amount that is allowable as a deduction in a particular year.

Although the Fund has obtained an opinion of counsel regarding the matters described in the preceding paragraph, it will not obtain a ruling from the IRS as to any aspect of the Fund's tax status. The tax consequences of investing in the Fund could be altered at any time by legislative, judicial, or administrative action.

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If the IRS audits the Fund, it could require investors to amend or adjust their tax returns of result in an audit of their tax.

The IRS may audit the Fund's tax returns. Any audit issues will be resolved at the Fund level by the Manager. If adjustments are made by the IRS, corresponding adjustments will be required to be made to the federal income tax returns of the shareholders, which may require payment of additional taxes, interest, and penalties. An audit of the Fund's tax return may result in the examination and audit of a shareholder's return that otherwise might not have occurred, and such audit may result in adjustments to items in the shareholder's return that are unrelated to the Fund operations. Each shareholder bears the expenses associated with an audit of that shareholder's return.

In the event that an audit of the Fund by the IRS results in adjustments to the tax liability of a shareholder, such shareholder will be subject to interest on the underpayment and may be subject to substantial penalties. In addition, a number of substantial penalties could potentially be asserted by the IRS on any such deficiencies.

The tax treatment of the Fund can not be guaranteed for the life of the Fund. Changes in law or regulations may adversely affect any such tax treatment.

Deductions, credits or other tax consequences may not be available to shareholders. Legislative or administrative changes or court decisions could be forthcoming which would significantly change the statements herein. In some instances, these changes could have substantial effect on the tax aspects of the Fund. Any future legislative changes may or may not be retroactive with respect to transactions prior to the effective date of such changes. Bills have been introduced in Congress in the past and may be introduced in the future which, if enacted, would adversely affect some of the tax consequences of the Fund.

ITEM 2. FINANCIAL INFORMATION

A. SELECTED FINANCIAL DATA.

The following table summarizes certain selected financial data at December 31, 2006 and for the year ended December 31, 2006, and is derived from the audited financial statements included herein. Although the date of formation of the Fund is December 19, 2005, the Fund did not begin business activities until February 1, 2006 when it began its private offering of shares. There were no business activities prior to February 1, 2006. The information summarized below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Fund's audited Financial Statements and related Notes.

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	Year ended December 31,
	2006
(in thousands, except share data)
Income Statement Data:
Oil and gas revenues	$	-
Total expenses		35,432
Loss from operations		(35,432	)
Interest income		3,085
Net loss	$	(32,347	)
Earnings per share:
Net loss per share	$	(37,725	)
Cash Flow Data
Net cash used in operating activities	$	(6,903	)
Net cash used in investing activities	$	(53,163	)
Net cash provided by financing activities	$	110,116
		December 31,
Balance Sheet Data:		2006
Cash and cash equivalents	$	50,050
Short-term investment in
marketable securities	$	33,138
Salvage fund	$	1,030
Oil and gas properties	$	641
Total assets	$	84,948
Total current liabilities	$	7,191
Total members' capital	$	77,757

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B. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview of the Fund’s Business

The Fund (an exploratory stage enterprise) is an independent oil and natural gas producer. The Fund’s primary investment objective is to generate cash flow for distribution to the Fund’s shareholders through participation in oil and natural gas exploration and development projects in the Gulf of Mexico. The Fund began its operations by offering its shares in a private offering on February 1, 2006. As a result of such offering, it raised approximately $124.4 million through the sale of 839.5395 shares of LLC membership interests. After the payment of approximately $19.9 million in offering fees, commissions and investment fees to Ridgewood Energy Corporation, affiliates, and broker-dealers, the Fund retained approximately $104.5 million available for investment. Investment fees represent a one time fee of 4.5% of initial capital contributions. The fee is payable for the service of investigating and evaluating investment opportunities and effecting transactions. Since inception in December 2005, the Fund has acquired an interest in ten offshore projects in the Gulf of Mexico. The Fund was notified by its operators that two of its projects had resulted in dry-holes. See also Item 1. “Business”.

The Manager performs certain duties on the Fund’s behalf including the evaluation of potential projects for investment and ongoing administrative and advisory services associated with these projects. The Fund does not currently, nor is there any plan, to operate any project in which the Fund participates. The Manager enters into operating agreements with third-party operators for the management of all exploration, development and producing operations, as appropriate. As compensation for the above duties, the Manager is paid a onetime investment fee for the evaluation of projects on the Fund’s behalf and an annual management fee (2.5%), payable monthly, for ongoing administrative and advisory duties as well as reimbursement of expenses. The Manager also participates in cash distributions. See also Item 1. "Business".

Subsequent Events

Management Fee

Effective January 1, 2007, the Manager has changed its policy regarding the annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month, based upon dry-hole expenses of $26.8 million through December 31, 2006.

Garden Banks 346/390

In March 2007, the Fund elected not to proceed with the completion of the Garden Banks 346/390 project, thereby resulting in a dry-hole determination for this property. In August 2006, oil had been discovered in one of the three potential reservoirs, however, a sidetrack would be necessary to extract economically viable reserve amounts. A sidetrack was completed unsuccessfully in August 2006 and a second sidetrack would be required to achieve commercially viable quantities. The Fund performed an analysis of the expenses associated with the second sidetrack relative to other opportunities in which the Fund may elect to invest. In March 2007, the Fund made the decision to leave the Garden Banks 346/390 well plugged in order to allocate its remaining funds to West Cameron 75. The Fund owns a 27% working interest in Garden Banks 346/390. Dry-hole costs related to Garden Banks 346/390, including plug and abandonment expenses, incurred by the Fund for the year ended December 31, 2006 were approximately $19.9 million. During 2007, the Fund incurred an additional $0.6 million of dry-hole expense related to this property.

Critical Accounting Estimates

The discussion and analysis of the Fund’s financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles, or GAAP. In preparing these financial statements, the Fund is required to make certain estimates, judgments and assumptions. These estimates, judgments and assumptions affect the reported amounts of the Fund’s assets and liabilities, including the disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of the Fund’s revenues and expenses during the periods presented. The Fund evaluates these estimates and assumptions on an ongoing basis. The Fund bases its estimates and assumptions on historical experience and on various other factors that the Fund believes to be reasonable at the time the estimates and assumptions are made. However, future events and their effects cannot be predicted with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from these estimates and assumptions under different circumstances or conditions, and such differences may be material to the financial statements. See Note 2 - Summary of Significant Accounting Policies of Item 15. contained in this Form 10 for a discussion of the Fund’s significant accounting policies.

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Accounting for Exploration and Development Costs

Exploration and production activities are accounted for using the successful efforts method. Costs of acquiring unproved and proved oil and gas leasehold acreage, including lease bonuses, brokers’ fees and other related costs, are capitalized. Annual lease rentals, exploration expenses and exploratory dry-hole costs are expensed as incurred. Costs of drilling and equipping productive wells, including development dry holes, and related production facilities are capitalized.

The costs of exploratory wells that find oil and gas reserves are capitalized pending determination of whether proved reserves have been found. Exploratory drilling costs remain capitalized after drilling is completed if (1) the well has found a sufficient quantity of reserves to justify completion as a producing well and (2) sufficient progress is being made in assessing the reserves and the economic and operating viability of the project. If either of those criteria is not met, or if there is substantial doubt about the economic or operational viability of the project, the capitalized well costs are charged to expense. Indicators of sufficient progress in assessing reserves and the economic and operating viability of a project include: commitment of project personnel, active negotiations for sales contracts with customers, negotiations with governments, operators and contractors and firm plans for additional drilling and other factors.

Proved Reserves

The Fund’s reserves are fully engineered on an annual basis by independent petroleum engineers. The Fund’s estimates of proved reserves are based on the quantities of natural gas and oil which geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions. However, there are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future revenues, rates of production and timing of development expenditures, including many factors beyond the Fund’s control. The estimation process is very complex and relies on assumptions and subjective interpretations of available geologic, geophysical, engineering and production data and the accuracy of reserve estimates is a function of the quality and quantity of available data, engineering and geological interpretation, and judgment. In addition, as a result of volatility and changing market conditions, commodity prices and future development costs will change from period to period, causing estimates of proved reserves to change, as well as causing estimates of future net revenues to change. For the year ended December 31, 2006, the Fund did not have any proved reserves. Estimates of proved reserves are key components of the Fund’s most significant financial estimates involving the Fund’s rate for recording depreciation, depletion and amortization.

Unproved Properties

Unproved properties is comprised of capital costs incurred for undeveloped acreage, wells and production facilities in progress, wells pending determination and related capitalized interest. These costs are initially excluded from the depletion base until the outcome of the project has been determined, or generally, until it is known whether proved reserves will or will not be assigned to the property. The Fund assesses all items in its unproved property balance on an ongoing basis for possible impairment or reduction in value. The Fund believes that substantially all of the costs included in its unproved property balance will be evaluated in the next two years.

Asset Retirement Obligations

For oil and natural gas properties, there are obligations to perform removal and remediation activities when the properties are retired. When a project reaches drilling depth and is determined to be either proved or dry, a liability is recognized for the fair value of legally required asset retirement obligations once it can be reasonably estimated. The Fund capitalizes the associated asset retirement costs as part of the carrying amount of the long-lived assets. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs.

Impairment of Long-Lived Assets

The Fund reviews long-lived assets, including oil and gas fields, for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recovered. Long-lived assets are tested based on identifiable cash flows (the field level for oil and gas assets) and are largely independent of the cash flows of other assets and liabilities. If the carrying amounts of the long-lived assets are not expected to be recovered by undiscounted future net cash flow estimates, the assets are impaired and an impairment loss is recorded. The amount of impairment is based on the estimated fair value of the assets determined by discounting anticipated future net cash flows.

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In the case of oil and gas fields, the present value of future net cash flows is based on management’s best estimate of future prices, which is determined with reference to recent historical prices and published forward prices, applied to projected production volumes of individual fields and discounted at a rate commensurate with the risks involved. The projected production volumes represent reserves, including probable reserves, expected to be produced based on a stipulated amount of capital expenditures. The production volumes, prices and timing of production are consistent with internal projections and other externally reported information. Oil and gas prices used for determining asset impairments will generally differ from those used in the standardized measure of discounted future net cash flows, since the standardized measure requires the use of actual prices on the last day of the year.

Results of Operations

The following review of operations for the year ended December 31, 2006 should be read in conjunction with the Fund’s financial statements and the notes thereto. The following table summarizes the Fund’s results of operations (in thousands, except per share data):

	Year ended December 31,
	2006
Revenue
Oil and gas revenues	$	-
Expenses
Dry-hole costs		26,783
Investment fees to affiliate		5,642
Management fees to affiliate		2,377
Other operating expense		11
General and administrative expenses		619
Total expenses		35,432
Loss from operations		(35,432	)
Other income
Interest income		3,085
Net loss	$	(32,347	)
Manager - Net loss	$	(675	)
Shareholders - Net loss	$	(31,672	)
Net loss per share	$	(37,725	)

Operating Revenues.From inception of the Fund through December 31, 2006, the Fund has not recorded any operating revenues and is considered an exploratory stage enterprise.

Operating and Other Expenses

Dry-hole costs.Dry-hole costs are those costs incurred to drill and develop a well that is ultimately found to be incapable of producing either oil or natural gas in sufficient quantities to justify completion of the well.The following table summarizes dry-hole costs inclusive of plug and abandonment costs for the year ended December 31, 2006.

	For the year ended December 31, 2006
Dry-hole costs	(in thousands)
Viosca Knoll 207	$	6,846
Garden Banks 346/390		19,937
	$	26,783

Investment Fee. The Manager is paid a one time investment fee. The fee is payable for the service of investigating and evaluating investment opportunities and affecting transactions when the capital contributions are made. Investment fees incurred and paid during the year ended December 31, 2006 were $5.6 million.

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Management Fee. The Manager receives an annual management fee, payable monthly, of 2.5% of total capital contributions. Management fees are charged to cover expenses associated with overhead incurred by the Manager for its on-going management, administrative and advisory services. Such overhead expenses include but are not limited to rent, payroll and benefits for employees of the Manager, and other administrative costs. Management fees incurred and paid for the year ended December 31, 2006 totaled approximately $2.4 million.

General and Administrative Expenses. Accounting, legal, fiduciary fees and insurance expenses represent costs specifically identifiable or allocable to the Fund. Accounting and legal fees represent annual audit and tax preparation fees, quarterly reviews and filing fees of the Fund. Fiduciary fees represent bank fees associated with the management of the Fund’s short-term investment portfolio in US Treasury Notes. Insurance expense represents premiums related to well control insurance and directors and officers liability policy, and are allocated by the Manager to the Fund based on capital raised by the Fund to total capital raised by all oil and natural gas funds managed by the Manager.

The following table summarizes general and administrative expenses for the year ended December 31, 2006.

	For the year ended December 31, 2006
General and administrative expenses:	( in thousands)
Accounting and legal fees	$	88
Insurance		443
Fiduciary fees		80
Other		8
	$	619

Interest Income

Interest income is comprised of interest earned on money market accounts and short-term investments in US Treasury Notes. Interest income for the year ended December 31, 2006 was $3.1 million.

Capital Resources and Liquidity

Operating Cash Flows

Cash flow used in operating activities for the year ended December 31, 2006 was $6.9 million, primarily related to payments for investment fees, management fees and general and administrative expenses of $5.6 million, $2.4 million and $0.6 million, respectively, offset by interest income received of $1.7 million.

Investing Cash Flows

Cash flow used in investing activities for the year ended December 31, 2006 was approximately $53.2 million. The Fund made investments in marketable securities of $84.1 million, inclusive of salvage fund, and received proceeds of approximately $51.3 million from marketable securities that matured during 2006. Additionally, the Fund made capital expenditures of $20.4 million for unproved oil and natural gas properties during 2006, of which $20.3 million were determined to be unsuccessful, or dry-holes.

Financing Cash Flows

Cash flow provided by financing activities for the year ended December 31, 2006 was approximately $110.1 million, primarily related to cash receipts of $124.3 million obtained from the Fund’s private offering, offset by $14.2 million of payments for syndication costs. At December 31, 2006, there was one outstanding subscription receivable of $60 thousand and $12 thousand of syndication costs payable to two affiliates of the Fund.

Estimated Capital Expenditures

The Fund has entered into multiple offshore operating agreements for the drilling and development of its investment properties. The estimated capital expenditures associated with these agreements can vary depending on the stage of development on a property-by-property basis. As of December 31, 2006, such estimated capital expenditures to be spent totaled approximately $43.4 million, all of which is expected to be paid out of unspent capital contributions within the next 12 months.

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The table below presents exploration and development capital expenditures from inception as well as estimated budgeted amounts for future periods. Remaining unspent development capital will be reallocated to one or more new unspecified projects.

	Spent through December 31, 2006		To be spent by December 31, 2007
Projects	(in thousands)
Garden Banks 346/390	$	19,937	$	600
Viosca Knoll 207		6,846		-
Main Pass 275		200		1,965
Vermillion 344		441		4,860
West Cameron 75		-		13,980
West Delta 68		-		4,140
Galveston 246		-		5,445
West Delta 67		-		3,870
Ship Shoal 81		-		4,275
South Marsh Island 111		-		4,230
	$	27,424	$	43,365

Liquidity Needs

The Fund’s primary short-term liquidity needs are to fund its 2007 operations, including management fees and capital expenditures, with existing cash on-hand and income earned from its short-term investments and cash and cash equivalents. The Manager is entitled to receive an annual management fee from the Fund regardless of whether the Fund is profitable in that year. The annual fee, payable monthly, is equal to 2.5% of total capital contributed by shareholders. Effective January 1, 2007, the Manager has changed its policy regarding the annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month based upon dry-hole expenses of $26.8 million through December 31, 2006.

On a long-term basis, until one of the Fund’s projects begins producing, all or a portion of the management fee is paid generally from the interest or dividend income generated by the Fund’s development capital that has not been spent, although the management fee can be paid out of capital contributions. Such interest and/or dividend income is more than enough to cover Fund expenses, including the management fee. Generally, it can take anywhere from 18 to 24 months to bring a project to production. Once a well is on production, the management fee and fund expenses are paid from operating income. Over time, as a well produces, the Fund may recover some or the entire management fee that may have been paid out of capital contributions.

Distributions, if any, are funded from cash flow from operations, and the frequency and amount are within the Manager’s discretion subject to available cash from operations, reserve requirements and Fund operations.

The capital raised by the Fund in its private placement is more than likely all the capital it will be able to obtain for investments in projects. The number of projects in which the Fund can invest will naturally be limited and each unsuccessful project the Fund experiences, if any, will not only reduce its ability to generate revenue, but also exhaust its limited supply of capital. Typically for a fund, the Manager seeks an investment portfolio that combines high and low risk exploratory projects.

When the Manager makes a decision for participation in a particular project, it assumes that the well will be successful and allocates enough capital to budget for the completion of that well and the additional development wells that are anticipated to be drilled. If the exploratory well is deemed a dry-hole or if it is un-economical, the capital allocated to the completion of that well and to the development of additional wells is then reallocated to a new project or used to make additional investments.

Off-Balance Sheet Arrangements

The Fund had no off-balance sheet arrangements as of December 31, 2006 and does not anticipate the use of such arrangements in the future.

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Contractual Obligations

The Fund enters into operating agreements with operators. On behalf of the Fund, an operator enters into various contractual commitments pertaining to exploration, development and production activities. The Fund does not discuss or negotiate any such contracts. No contractual obligations exist at December 31, 2006.

C. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Projects drilled may not have commercially productive oil and natural gas reservoirs. In such an event, the Funds' revenue, future results of operations and financial condition would be adversely impacted.

The Fund does not have or use, any derivative instruments nor does it have any plans to enter into such derivative arrangements. The Fund will generally invest cash in high-quality credit instruments consisting primarily of money market funds, bankers acceptance notes and government agency securities with maturities of six months or less. The Fund does not expect any material loss from cash equivalents and therefore believes its potential interest rate exposure is not material. The Fund has no plan to conduct any international activities and therefore believes it is not subject to foreign currency risk.

The principal market risks to which the Fund is exposed that may adversely impact the Fund's results of operations and financial position are changes in oil and natural gas prices.

Low commodity prices could have an adverse affect on the Fund’s future profitability and, in such an event the Fund may be required by accounting rules to write down the carrying value of the Fund’s projects. Revenue to the Fund will be sensitive to changes in price to be received for oil and natural gas production. Prevailing market prices fluctuate in response to many factors that are outside of the Fund's control such as the supply and demand for oil and natural gas. Availability of alternative fuels as well as seasonal risks such as hurricanes can also impact the supply and demand.

High oil and natural gas prices have resulted in a strong demand for and a tight supply of drilling rigs necessary to drill new projects. The increased cost in daily rig rates could have a negative impact on the return to shareholders in the Fund. The shortage of drilling rigs could delay the application of capital to such projects and thus delay revenue from operations.

ITEM 3. PROPERTIES

The information regarding the Fund’s properties that is contained in Item 1. Business of this Registration Statement on Form 10 is incorporated herein by reference.

ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information with respect to beneficial ownership of the shares as of December 31, 2006 (no person owns more than 5% of the shares) by:

·   each executive officer (there are no directors); and

·   all of the executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them. Percentage of beneficial ownership is based on 839.5395 shares outstanding at December 31, 2006. Other than the above, no officer and director owns any of the Fund's shares.

Name of beneficial owner	Number of shares	Percent
Robert E. Swanson (1), President and Chief Executive Officer	3.6667	*
Executive officers as a group (1)	3.6667	*

* Represents less than one percent.

(1) Includes shares owned by the spouse of Mr. Swanson or one of his Trusts.

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ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS

The Fund has engaged Ridgewood Energy as Manager. Ridgewood Energy was founded in 1982 and, as Manager, has very broad authority, including the election of executive officers.

Executive officers of Ridgewood Energy and the Fund and their ages at December 31, 2006 are as follows:

Name, Age and Position with Registrant		Officer Since
Robert E. Swanson, 59
	President and Chief Executive Officer	1982
W. Greg Tabor, 46
	Executive Vice President and
	Director of Business Development	2004
Robert L. Gold, 47
	Executive Vice President	1987
Kathleen P. McSherry, 41
	Senior Vice President and
	Chief Financial Officer	2000
Daniel V. Gulino, 46
	Senior Vice President and General Counsel	2003
Adrien Doherty, 54		2006
	Executive Vice President

Set forth below is the name of, and certain biographical information regarding the executive officers of Ridgewood Energy and the Fund:

Robert E. Swanson has served as the President, Chief Executive Officer, sole director, and sole stockholder of Ridgewood Energy since its inception. Mr. Swanson is also the controlling member of Ridgewood Power and Ridgewood Capital, affiliates of Ridgewood Energy. Mr. Swanson has been President and registered principal of Ridgewood Securities and has served as the Chairman of the Board of Ridgewood Capital since its organization in 1998. Mr. Swanson is a member of the New York State and New Jersey State Bars, the Association of the Bar of the City of New York and the New York State Bar Association. He is a graduate of Amherst College and Fordham University Law School.

Greg Tabor has served as the Executive Vice President and Director of Business Development for Ridgewood Energy since January 2004. Mr. Tabor was senior business development manager for El Paso Production Company from December 2001 to December 2003. From April 2000 to December 2001, Mr. Tabor was Vice President, Business Development for Madison Energy Advisors. Mr. Tabor is a graduate of the University of Houston.

Robert L. Gold has served as the Executive Vice President of Ridgewood Energy since 1987. Mr. Gold is also Executive Vice President of Ridgewood Power. Mr Gold has also served as the President and Chief Executive Officer of Ridgewood Capital since its inception in 1998. Mr. Gold is a member of the New York State Bar. He is a graduate of Colgate University and New York University School of Law.

Kathleen P. McSherry has served as the Senior Vice President and Chief Financial Officer of Ridgewood Energy since 2000. Ms. McSherry has been employed by Ridgewood Energy since 1987, first as the Assistant Controller and then as the Controller before being promoted to Chief Financial Officer in 2000. Ms. McSherry also serves as Vice President of Systems and Administration of Ridgewood Power. Ms. McSherry holds a Bachelor of Science degree in Accounting.

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Daniel V. Gulino has served as Senior Vice President and General Counsel of Ridgewood Energy since August 2003. Mr. Gulino also serves as Senior Vice President and General Counsel of Ridgewood Power Management, Ridgewood Power, and Ridgewood Capital and has done so since 2000. Mr. Gulino is a member of the New Jersey State and Pennsylvania State Bars. He is a graduate of Fairleigh Dickinson University and Rutgers School of Law.

Adrien Doherty has served as Executive Vice President of Ridgewood Energy since 2006. Mr. Doherty joined Ridgewood Energy after a thirty year career in investment banking, most recently as Head of Barclay’s Capital’s oil and gas banking effort. Mr. Doherty is a graduate of Amherst College and the Wharton Graduate Division of the University of Pennsylvania.

Board of Directors and Board Committees

The Fund does not have its own board of directors or any board committees. The Fund relies upon the Manager to provide recommendations regarding dispositions and financial disclosure. Officers of the Fund are not compensated by the Fund, and all compensation matters are addressed by the Manager, as described in Item 6 of this Form 10. Because the Fund does not maintain a board of directors and because officers of the Fund are compensated by the Manager, the Manager believes that it is appropriate for the Fund to not have a nominating or compensation committee.

ITEM 6. EXECUTIVE COMPENSATION

The executive officers of the Fund do not receive compensation from the Fund. The Manager, or its affiliates, compensates the officers without additional payments by the Fund. See Item 7. “Certain Relationships and Related Transactions and Director Independence” for more information regarding Manager compensation and payments to affiliated entities.

Compensation Discussion and Analysis

The executive officers of the Fund, Mr. Swanson, Mr. Tabor, Mr. Gold, Ms. McSherry, Mr. Gulino and Mr. Doherty, are employed by, and are executive officers of, the Manager, Ridgewood Energy, and provide managerial services to the Fund in accordance with the terms of the Fund’s LLC operating agreement. The Fund does not have any other executive officers. The Manager determines and pays the compensation of these officers. Each of the executive officers of the Fund also serves as an executive officer of each of the other funds managed by the Manager. Because the executive officers are employees of the Fund’s Manager and provide managerial services to all of the funds managed by the Fund’s Manager in the course of such employment, they do not receive additional compensation for providing managerial services to the Fund or to any one or more new funds established by the Manager than they would otherwise receive from the Manager if they did not serve in such capacities for the Fund or any such other funds.

The Manager is fully responsible for the payment of compensation to the executive officers. The Fund does not pay any compensation to its executive officers and does not reimburse the Manager for the compensation paid to executive officers. The Fund does, however, pay the Manager a management fee and the Manager may determine to use a portion of the proceeds from the management fee to pay compensation to executive officers of the Fund.

ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

In connection with the sale of shares in 2006, Ridgewood Securities Corporation, an affiliate of the Manager, earned a placement fee and commissions totaling $1.4 million included in syndication costs. The Manager earned an investment fee for the services of investigating and evaluating projects for future investment totaling $5.6 million.

The Manager was paid $4.4 million to cover legal and syndication fees for the organization, distribution and offering expenses.

The Manager receives an annual management fee, payable monthly, equal to 2.5% of total capital contributions, for general and administrative and management services supplied to us. For the year ended December 31, 2006, the Manager was paid fees which totaled $2.4 million. Effective January 1, 2007, the Manager has changed its policy regarding this annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month based upon dry-hole expenses of $26.8 million through December 31, 2006. Additionally, when distributions are made, the Manager is entitled to a portion of funds distributed to shareholders. There have been no distributions for the period December 19, 2005 (Inception) through December 31, 2006.

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Profits and losses are allocated in accordance with the LLC operating agreement. In general, profits and losses in any year are allocated 85% to shareholders and 15% to the Manager. The primary exception to this treatment is that all items of expense, loss, deduction and credit attributable to the expenditure of shareholders' capital contributions are allocated 99% to shareholders and 1% to the Manager.

ITEM 8. LEGAL PROCEEDINGS

None.

ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is currently no established public trading market for the shares of membership interest of the Fund. The Fund is not currently offering or proposing to offer any shares for sale to the public. There are no outstanding options or warrants to purchase, or securities convertible into shares and the Fund does not have any equity-based compensation plans. The shares are restricted as to resale. Shareholders wishing to transfer shares should also consider the applicability of state securities laws. The shares have not been registered under the Securities Act or under any other similar law of any state (except for certain registrations that do not permit free resale) in reliance upon what the Fund believes to be exemptions from the registration requirements contained therein. Because the shares have not been registered, they are restricted securities as defined in Rule 144 under the 1933 Act.

At April 16, 2007, there were 1,300 holders of Fund shares.

To date, the Fund has not declared or paid cash dividends to the Fund shareholders. Ridgewood Energy Corporation, the Manager, may distribute dividends from available cash from operations as defined in the Fund LLC operating agreement.

ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES

During the period from February 1, 2006 until June 12, 2006, the Fund issued an aggregate of 839.5395 shares for gross proceeds of approximately $124.4 million. All sales of unregistered securities relied on Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. All of the sales were made without the use of an underwriter. All purchasers of shares represented and warranted to the Fund that they were accredited investors as defined in Rule 501(a) under the Securities Act and that the shares were being purchased for investment and not for resale.

From the amount raised, approximately $14.2 million was disbursed for commissions and legal syndication fees. Additionally, approximately $5.6 million was paid as an investment fee to Ridgewood Energy Corporation, the Manager, for the investigation and evaluation of investment property prospects. Remaining funds are expected to be used for exploration and development activities of oil and gas properties as well as the operation of the Fund.

ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED

The shares to be registered hereunder are shares of membership interest in the Fund, which is a limited liability company. The following is a summary of certain provisions of the LLC operating agreement.

Control of LLC Operations

The powers vested in the Ridgewood Energy Corporation (the “Manager”), as manager of the Fund, under the LLC Agreement are broad. The Manager has full, exclusive and complete discretion in the management and control of the affairs of the Fund and shareholders have no power to take part in the management of, or to bind, the Fund.

The Fund’s officers are appointed by the Manager and may be removed by it at any time. Additionally, the Manager may authorize any sale, lease, pledge or other transfer of substantially all of a Fund’s assets without a vote of the shareholders.

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Amendments and Voting Rights

The Manager may amend the LLC Agreement without notice to or approval of the holders of shares for the following purposes:

·   to cure ambiguities or errors;

·   to equitably resolve issues arising under the LLC Agreement so long as similarly situated shareholders are not treated materially differently;

·   to comply with law; to make other changes that will not materially and adversely affect any shareholder’s interest;

·   to maintain the federal income tax status of the Fund or any shareholder, as long as no shareholder’s liability is materially increased; or

·   to make modifications to the computation of items affecting the shareholders’ capital accounts to comply with the Code or to reflect the creation of an additional class or series of shares and the terms thereof.

Other amendments to the LLC Agreement may be proposed either by the Manager or by Fund shareholders. A vote on the proposal may be made by either by calling a meeting of the shareholders or by soliciting written consents. Proposed amendments require the approval of shareholders who hold of record at least a majority of the total shares on the record date for the action, given at a meeting of shareholders or by written consents. Any amendment requiring shareholder action (other than an amendment to allow the Fund to be taxed other than as a partnership) may not increase any shareholder’s liability, change the capital contributions required of him or her or his or her rights in interest in the Fund’s profits, losses, deductions, credits, revenues or distributions in more than a de minimis matter, or change his or her rights on dissolution or any voting rights without the shareholder’s consent. Any amendment that changes the Manager’s management rights requires its consent. Generally, shareholders have no right to vote on matters not involving an amendment to the LLC Agreement or the removal of the Manager. However, if any other matter does require a vote of shareholders, it must be approved by shareholders who own of record at least a majority of the total shares, or if a different vote is required by law, each shareholder will have voting rights equal to his or her total shares for purposes of determining the number of votes cast or not cast.

For all purposes, a majority of the shares is a majority of the issued and outstanding shares, including those owned, if any, by the Manager or its affiliates. A majority of the shares voted is insufficient if it is less than a majority of the outstanding shares.

The consent of all holders of shares is required for dissolving or terminating the Fund, other than as provided by the LLC Agreement; or adding a new Manager except as described below.

Participation in Costs and Revenues

Available cash determines what amounts in cash the Fund will be able to distribute in cash to shareholders. There are two types of available cash:

·   available cash from dispositions is total cash received by the Fund from the proceeds of the sale or other disposition of the Fund’s Property (including items such as insurance proceeds, refinancing proceeds, condemnation proceeds and other amounts received out of the ordinary course of business), but excluding dispositions of temporary investments of the Fund; and

·   available cash from operations is all other available cash.

Available Cash from Dispositions and Available Cash from Operations are defined in the LLC Agreement and are not defined by and are not the same as similar concepts under generally accepted accounting principles.

There is no fixed requirement to distribute available cash. Instead, available cash will be distributed to shareholders to the extent, and at such times, as the Fund believes is advisable. Once the amount and timing of a distribution is determined, it shall be made to shareholders as described below.

- 29 -

Distributions from Operations

At various times during a calendar year, the Fund will determine whether there is enough available cash from operations for a distribution to shareholders. The amount of available cash from operations determined to be available, if any, will be distributed to the shareholders. At all times, the Manager will be entitled to 15% and shareholders will be entitled to 85% of the available cash from operations distributed.

Distributions of Available Cash from Dispositions

Available cash from dispositions that the Fund decides to distribute will be paid as follows:

·   before shareholders have received total distributions (including distributions from available cash from operations and available cash from dispositions) equal to their capital contributions, 99% of available cash from dispositions will be distributed to shareholders and 1% to the Manager; and

·   after shareholders have received total distributions (including available cash from operations and available cash from dispositions) equal to their capital contributions, 85% of available cash from dispositions will be distributed to shareholders and 15% to the Manager.

General Distribution Provisions

Distributions to shareholders under the foregoing provisions will be apportioned among them in proportion to their ownership of shareholder shares. The Manager has the sole discretion to determine the amount and frequency of any distributions. However, distributions may not be made selectively to one shareholder or group of shareholders, but must be made ratably to all shareholders entitled to that type of distribution at that time. The Manager in its discretion nevertheless may credit select persons with a portion of its compensation from the Fund or distributions otherwise payable to the Manager.

Return of Capital Contributions

If the Fund for any reason at any time does not find it necessary or appropriate to retain or expend all capital contributions, it may, in its sole discretion, return any or all of such excess capital contributions ratably to shareholders. A return of capital contributions is not treated as a distribution. The Fund and the Manager will not be required to return any fees deducted from the original capital contribution or any costs and expenses incurred and paid by the Fund. The shareholders will be notified of the source of the payment. Any such return of capital will decrease the shareholders’ capital contributions.

Voluntary Additional Capital Contributions and Supplemental Offering of Shares

The LLC Agreement does not provide for any mandatory assessments of capital from shareholders. This means that the Fund cannot require any shareholder to contribute more money after such shareholder completes his subscription and pays his initial capital contributions.

If voluntary additional capital contributions are requested by the Fund to fund additional project activities, the Manager will do so through a supplemental offering of shares in the Fund. The LLC Agreement provides the Manager with discretion in determining the nature, scope, amount and terms of such supplemental offering.

A shareholder who elects to not participate in any supplemental offering of shares and does not provide additional capital contributions for such additional project activities will have no interest in such additional project activities, but will retain his interest in the projects in which the Fund has already invested. The failure of a shareholder to participate in a supplemental offering may have a dilutive effect on such shareholder’s investment.

Removal of Manager

Shareholders may propose the removal of the Manager, either by calling a meeting or soliciting consents in accordance with the terms of the LLC Agreement. Removal of the Manager requires the affirmative vote of shareholders who are holders of record of at least a majority of the total shareholder shares. Removal of a Manager causes the Fund to terminate the Fund’s operations and dissolve the Fund unless a majority of the shareholder shares elects to continue operations. The shareholders may replace the removed Manager or fill a vacancy by vote of shareholders who hold of record a majority of the total shareholder shares.

- 30 -

If the Manager is removed, resigns (other than voluntarily without cause) or is unable to serve, it may elect to exchange its management rights and rights to distributions, if any, for a series of cash payments from the Fund in amounts equal to the amounts of distributions to which the Manager would otherwise have been entitled under the LLC Agreement in respect of investments made by the Fund prior to the date of any such removal, resignation or other incapacity. The removed Manager would continue to receive its pro rata share of all allocations to shareholders as provided in the LLC Agreement which are attributable to any shareholder shares owned by it.

Alternatively, the removed Manager may elect to engage a qualified independent appraiser and cause the Fund to engage another qualified independent appraiser (at the Fund’s expense in each case) to value the Fund property as of the date of such removal, resignation or other incapacity as if the property had been sold at its fair market value so as to include all unrealized gains and losses. If the two appraisers cannot agree on a value, they would appoint a third independent appraiser (whose cost would be borne by the Fund) whose determination, made on the same basis, would be final and binding.

Based on the appraisal, the Fund would make allocations to the removed Manager’s capital account of profits, losses and other items resulting from the appraisal as of the date of such removal, resignation or other incapacity as if the Fund’s fiscal year had ended, solely for the purpose of determining the Manager’s capital account. If the removed Manager has a positive capital account after such allocation, the Fund would deliver a promissory note of the Fund to the Manager, the principal amount of which would be equal to the Manager’s capital account and which would bear interest at a rate per annum equal to the prime rate in effect at Chase Manhattan Bank, N.A. on the date of removal, resignation or other incapacity, with interest payable annually and unpaid principal payable only from 25% of any available cash before any distributions thereof are made to the shareholders under the LLC Agreement.

If the capital account of the removed Manager has a negative balance after such allocation, it would be obligated to contribute to the capital of the Fund in its sole discretion either cash in an amount equal to the negative balance in its capital account or a promissory note to the Fund in such principal amount maturing five years after the date of such removal, resignation or other incapacity, bearing interest at the rate specified above. If the removed Manager chose to elect the appraisal alternative, its entire interest in the Fund would be terminated other than the right to receive the promissory note and payments thereunder as provided above.

Dissolution of Fund

The Fund will dissolve and terminate its operations on the earliest to occur of (a) December 31, 2040, (b) the sale of substantially all of the Fund’s Property, (c) the removal, dissolution, resignation, insolvency, bankruptcy, death or other legal incapacity or disqualification of the Manager, (d) the vote of either all shareholders or of the Manager and shareholders who own at least a majority of the shareholder shares of record or (e) any other event requiring dissolution by law. The Fund will wind up its business after dissolution unless (i) the Manager and shareholders who own at least a majority of the shareholder shares of record or (ii) if there is no Manager, shareholders who own at least a majority of the shareholder shares of record, elect to continue the Fund. The Manager (or in the absence thereof, a liquidating trustee chosen by the shareholders) will liquidate the Fund’s assets if it is not continued.

Transferability of Interests

No shareholder may assign or transfer all or any part of his or her interest in the Fund and no transferee will be deemed a substituted shareholder or be entitled to exercise or receive any of the rights, powers or benefits of a shareholder other than the right to receive distributions attributable to the transferred interest unless (i) such transferee has been approved and accepted by the Fund, in its sole and absolute discretion, as a substituted shareholder, and (ii) certain other requirements set forth in the Fund’s LLC Agreement (including receipt of an opinion of counsel that the transfer does not have adverse effects under the securities laws and the Investment Company Act of 1940) have been satisfied.

The Manager may not resign except for cause (which cause does not include the fact or determination that continued service would be unprofitable to it) and may not transfer its interest in the Fund except to pledge it as security for a loan to the Manager if the pledge does not reduce cash flow distributable to other shareholders.

- 31 -

Liability

Assuming compliance with the LLC Agreement and applicable formative and qualifying requirements in Delaware and any other jurisdiction in which the Fund conducts its business, a shareholder will not be personally liable under Delaware law for any obligations of the Fund, except to the extent of any unpaid capital contributions, except for the amount of any wrongful distributions that render the Fund insolvent and except for indemnification liabilities arising from any misrepresentation made by him or her to the Fund when purchasing shares.

ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Delaware Limited Liability Company Act permits a Delaware limited liability company to indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever.

The Fund's LLC operating agreement provides that each managing person (which includes the Manager and the Fund's officers, agents, consultants and affiliates and their directors, trustees, officers, agents and affiliates when acting on behalf of the Fund) will be indemnified and held harmless to the full extent of the Fund's assets (and to the maximum extent permitted by applicable law) from any loss or damage incurred by the managing person, including any amounts paid in settlement of any claims incurred in connection with the Fund or in connection with claims by the Fund, in the right of the Fund or by or in right of any shareholder, due to any act or omission performed or omitted by the managing person, if the managing person, in good faith, determined that such course of conduct was in the Fund's best interest and the course of conduct did not constitute bad faith, gross negligence or willful misconduct by such managing person.

The Fund's LLC operating agreement provides that the Fund will not indemnify any managing person for liability imposed or expenses incurred in connection with any claim arising out of an alleged violation of any federal or state securities laws, unless the claim is successfully adjudicated on the merits in favor of the managing person, dismissed with prejudice on the merits, or subject to a court approved settlement.

The Manager has full and complete discretion to authorize indemnification of any managing person consistent with the requirements of the LLC operating agreement at any time, regardless of whether a claim is pending or threatened and regardless of any conflict of interest between the Manager and the Fund that may arise in regard to the decision to indemnify a managing person.

ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15. “Financial Statements and Exhibits".

ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS

(a) Index to Financial Statements:

See "Index to Financial Statements" set forth on page F-1.

- 32 -

(b) Exhibits:
EXHIBIT
NUMBER	TITLE OF EXHIBIT
3.1	Articles of Formation of Ridgewood Energy S Fund, LLC dated December 13, 2005 and filed with the Secretary of State of the State of Delaware on December 19, 2005.
3.2	Limited Liability Company Agreement between Ridgewood Energy Corporation and Investors of Ridgewood Energy S Fund, LLC dated February 1, 2006.
3.3	Private Offering Memorandum, dated February 1, 2006.
10.1	Participation Agreement between Chevron U.S.A., Inc. and Ridgewood Energy Corporation as Manager for Viosca Knoll 207.
10.2	Participation Agreement between Walter Oil & Gas, Inc. and Ridgewood Energy as Manager for Garden Banks 346/390.
10.3	Participation Agreement between Newfield Exploration Company and Ridgewood Energy as Manager for Main Pass 275.
10.4	Multi Well Participation Agreement between LLOG Exploration Offshore, Inc. and Ridgewood Energy as Manager for Vermilion 344, West Delta 68, Galveston 248, West Delta 67, Ship Shoal 81 and South Marsh Island 111.
10.5	Participation Agreement between El Paso Inc. and Ridgewood Energy as Manager for West Cameron 75.
14	Code of Ethics

- 33 -

Index to Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheet at December 31, 2006	F-3
Statement of Operations for the year ended December 31, 2006	F-4
Statement of Changes in Members' Capital for the period from December 19, 2005 (Inception) through December 31, 2006	F-5
Statement of Cash Flows for the year ended December 31, 2006	F-6
Notes to Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Manager of Ridgewood Energy S Fund, LLC:

We have audited the accompanying balance sheet of Ridgewood Energy S Fund, LLC (an exploratory stage enterprise) (the “Fund”) as of December 31, 2006, the related statements of operations and cash flows for the year ended December 31, 2006 and statement of changes in members’ capital for the period from December 19, 2005 (Inception) through December 31, 2006. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material respects, the financial position of Ridgewood Energy S Fund, LLC at December 31, 2006, and the result of its operations and its cash flows for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

April 23, 2007

Parsippany, New Jersey

F-2

RIDGEWOOD ENERGY S FUND, LLC

(An exploratory stage enterprise)

BALANCE SHEET

(in thousands, except share data)

	December 31,
	2006
ASSETS
Current assets:
Cash and cash equivalents	$	50,050
Short-term investment in marketable securities		33,138
Other current assets		89
Total current assets		83,277
Salvage fund		1,030
Oil and gas properties-unproved		641
Total assets	$	84,948
LIABILITIES AND MEMBERS' CAPITAL
Current liabilities:
Due to operator	$	7,064
Accrued expenses payable		104
Due to affiliates (Note 7)		23
Total current liabilities		7,191
Commitments and contingencies (Note 9)
Members' capital:
Manager:
Deficit accumulated during the exploratory stage		(675	)
Manager's total		(675	)
Shareholders:
Capital contributions (1,000 shares authorized;
839.5395 shares issued and outstanding)		124,401
Syndication costs		(14,237	)
Subscription receivable		(60	)
Deficit accumulated during the exploratory stage		(31,672	)
Shareholders' total		78,432
Total members' capital		77,757
Total liabilities and members' capital	$	84,948

The accompanying notes are an integral part of these financial statements.

F-3

RIDGEWOOD ENERGY S FUND, LLC

(An exploratory stage enterprise)

STATEMENT OF OPERATIONS

(in thousands, except share data)

	For the year ended
	December 31,
	2006
Revenue
Oil and gas revenue	$	-
Expenses
Dry-hole costs		26,783
Investment fees to affiliate (Note 7)		5,642
Management fees to affiliate (Note 7)		2,377
Other operating expense		11
General and administrative expenses		619
Total expenses		35,432
Loss from operations		(35,432	)
Other income
Interest income		3,085
Net loss	$	(32,347	)
Manager - Net loss	$	(675	)
Shareholders - Net loss	$	(31,672	)
Net loss per share	$	(37,725	)

The accompanying notes are an integral part of these financial statements.

F-4

RIDGEWOOD ENERGY S FUND, LLC

(An exploratory stage enterprise)

STATEMENT OF CHANGES IN MEMBERS' CAPITAL

(in thousands, except share data)

	# of Shares		Manager			Shareholders			Total
Balances, December 19, 2005 (Inception)			$	-		$	-		$	-
Shareholders' capital contributions		839.5395		-			124,401			124,401
Syndication costs (included offering fee of $4,388 paid
to the Manager and selling commissions and placement
fees of $166 and $1,188, respectively, paid to
Ridgewood Securities Corp. - Note 7)				-			(14,237	)		(14,237	)
Subscription receivable							(60	)		(60	)
Net loss				(675	)		(31,672	)		(32,347	)
Balances, December 31, 2006		839.5395	$	(675	)	$	78,432		$	77,757

The accompanying notes are an integral part of these financial statements.

F-5

RIDGEWOOD ENERGY S FUND, LLC

(An exploratory stage enterprise)

STATEMENT OF CASH FLOWS

(in thousands)

	For the year ended
	December 31, 2006
Cash flows from operating activities
Net loss	$	(32,347	)
Adjustments to reconcile net loss to net cash used in
operating activities
Dry-hole costs		26,783
Interest earned on marketable securities		(1,366	)
Changes in assets and liabilities
Increase in other current assets		(89	)
Increase in accrued expenses payable		104
Increase in due to affiliates		12
Net cash used in operating activities		(6,903	)
Cash flows from investing activities
Capital expenditures for oil and gas properties		(30	)
Capital expenditures for unsuccessful properties		(20,330	)
Salvage fund investments		(1,030	)
Proceeds from the sale of marketable securities		51,317
Investment in marketable securities		(83,090	)
Net cash used in investing activities		(53,163	)
Cash flows from financing activities
Contributions from shareholders		124,341
Syndication costs paid		(14,225	)
Net cash provided by financing activities		110,116
Net increase in cash and cash equivalents		50,050
Cash and cash equivalents, beginning of period		-
Cash and cash equivalents, end of period	$	50,050

The accompanying notes are an integral part of these financial statements.

F-6

RIDGEWOOD ENERGY S FUND, LLC

(An exploratory stage enterprise)

NOTES TO AUDITED FINANCIAL STATEMENTS

1. Organization and Purpose

The Ridgewood Energy S Fund, LLC ("Fund") (an exploratory stage enterprise), a Delaware limited liability company, was formed on December 19, 2005 and operates pursuant to a limited liability company agreement ("Agreement") dated as of February 1, 2006 by and among Ridgewood Energy Corporation ("Manager"), and the shareholders of the Fund. Although the date of formation is December 19, 2005, the Fund did not begin business activities until February 1, 2006 when it began its private offering of shares.

The Fund was organized to acquire, drill, construct and develop oil and natural gas properties located in the United States offshore waters of Texas, Louisiana and Alabama in the Gulf of Mexico. The Fund has devoted most of its efforts to raising capital and oil and natural gas exploration activities. To date, the Fund has not earned revenue from these operations and is considered in the exploratory stage.

The Manager performs (or arranges for the performance of) the management and administrative services required for Fund operations. Such services include, without limitation, the administration of shareholder accounts, shareholder relations and the preparation, review and dissemination of tax and other financial information. In addition, the Manager provides office space, equipment and facilities and other services necessary for Fund operations. The Manager also engages and manages the contractual relations with outside custodians, depositories, accountants, attorneys, broker-dealers, corporate fiduciaries, insurers, banks and others as required (Notes 2, 6 and 7).

2. Summary of Significant Accounting Policies

Exploratory Stage Enterprise

Management uses various criteria to evaluate whether the Fund is an exploratory stage enterprise, including but not limited to, the success of drilling, the timing, significance, quality and flow of production and the results of reserve reports obtained from experts. On a case by case basis, once a project begins production, management performs diligent analysis at regular intervals utilizing the various criteria noted above to determine the appropriate classification of the Fund as an exploratory stage entity. Based on such an analysis, management has determined the Fund continues to be an exploratory stage enterprise. As the Fund did not have business activities prior to 2006, it has not included inception to date Statements of Operations or Cash Flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, the Manager reviews its estimates, including those related to amounts advanced to and billed by operators, determination of proved reserves, impairment allowances and environmental liabilities. Actual results may differ from those estimates.

Advances to Operators for Working Interests and Expenditures

The Fund’s acquisition of a working interest in a well or a project requires it to make a payment to the seller for the Fund’s rights, title and interest. The Fund is required to advance its share of estimated cash outlay for the succeeding month’s operation. The Fund accounts for such payments as advances to operators for working interests and expenditures. As drilling costs are incurred, the advances are transferred to unproved properties.

Oil and Natural Gas Properties

Investments in oil and natural gas properties are operated by unaffiliated entities ("Operators") who are responsible for drilling, administering and producing activities pursuant to the terms of the applicable Operating agreements with working interest owners. The Fund's portion of exploration, drilling, operating and capital equipment expenditures relating to the wells are advanced and billed by Operators through authorization for expenditures.

F-7

The successful efforts method of accounting for oil and gas producing activities is followed. Acquisition costs are capitalized when incurred. Other oil and natural gas exploration costs, excluding the costs of drilling exploratory wells, are charged to expense as incurred. The costs of drilling exploratory wells are capitalized pending the determination of whether the wells have discovered proved commercial reserves. If proved commercial reserves have not been found, exploratory drilling costs are expensed to dry-hole expense. Costs to develop proved reserves, including the costs of all development wells and related facilities and equipment used in the production of natural crude oil and natural gas, are capitalized. Expenditures for ongoing repairs and maintenance of producing properties are expensed as incurred.

Upon the sale or retirement of a proved property (i.e. a producing well), the cost and related accumulated depletion and amortization will be eliminated from the property accounts, and the resultant gain or loss is recognized. On the sale or retirement of an unproved property, gain or loss on the sale is recognized. It is not the Manager’s intention to sell any of the Fund’s property interests.

Capitalized acquisition costs of producing oil and natural gas properties after recognizing estimated salvage values are depleted by the unit-of-production method.

As of December 31, 2006 amounts recorded in due to operators totaling $7.1 million related to the acquisition of oil and gas property, both successful and unsuccessful.

Revenue Recognition and Production Receivable

Oil and natural gas sales are recognized when delivery is made by the Operator to the purchaser and title is transferred (i.e., production has been delivered to a pipeline or transport vehicle). The Fund has not earned revenue from inception to date.

The volume of oil and natural gas sold on the Fund’s behalf may differ from the volume of oil and natural gas the Fund is entitled to. The Fund will account for such oil and natural gas production imbalances by the entitlements method. Under the entitlements method, the Fund will recognize a receivable from other working interest owners for volumes oversold by other working interest owners, and a payable to other working interest owners for volumes oversold by the Fund. At December 31, 2006, there were no oil or natural gas balancing arrangements between the Fund and other working interest owners.

Syndication Costs

Direct costs associated with offering the Fund’s shares including professional fees, selling expenses and administrative costs payable to the Manager, an affiliate of the Manager and outside brokers are reflected as a reduction of shareholders’ capital.

Asset Retirement Obligations

For oil and natural gas properties, there are obligations to perform removal and remediation activities when the properties are retired. When a project reaches drilling depth and is determined to be either proved or dry, an asset retirement obligation is incurred. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs.

	December 31, 2006
	(in thousands)
Balance - Beginning of period	$	-
Liabilities incurred		634
Liabilities settled		(634	)
Balance - End of period	$	-

F-8

Impairment of Long-Lived Assets

In accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment of Long-Lived Assets” (“SFAS No. 144”), long-lived assets, such as oil and natural gas properties, are evaluated when events or changes in circumstances indicate the carrying value of such assets may not be recoverable. The determination of whether impairment has occurred is made by comparing the carrying values of long-lived assets to the estimated future undiscounted cash flowsattributable to the asset. The impairment loss recognized is the excess of the carrying value over the future discounted cash flows attributable to the asset or the estimated fair value of the asset.   No impairments have been recorded in the Fund since inception.

Depletion and Amortization

Depletion and amortization of the cost of proved oil and natural gas properties are calculated using the units of production method. Proved developed reserves are used as the base for depleting the cost of successful exploratory drilling and development costs. The sum of proved developed and proved undeveloped reserves is used as the base for depleting (or amortizing) leasehold acquisition costs, the costs to acquire proved properties and platform and pipeline costs. At December 31, 2006, the Fund did not have accumulated depletion as production has not yet occurred.

Income Taxes

No provision is made for income taxes in the financial statements. Because the fund is an LLC, the income or losses are passed through and included in the tax returns of the individual shareholders.

Cash and cash equivalents

All highly liquid investments with maturities when purchased of three months or less are considered as cash and cash equivalents. At times, bank deposits may be in excess of federal insured limits. At December 31, 2006, bank balances inclusive of the salvage fund exceeded federally insured limits by $24.9 million. The Fund maintains bank deposits with accredited financial institutions to mitigate such risk.

Salvage Fund

Pursuant to the Fund’s LLC Agreement, the Fund deposits in a separate interest-bearing account, or a salvage fund, money to provide for dismantling production platforms and facilities, plugging and abandoning the wells and removing the platforms, facilities and wells after their useful lives, in accordance with applicable federal and state laws and regulations.

Interest earned on the account will become part of the salvage fund; there are no legal restrictions on the withdrawal from the salvage fund.

Income and Expense Allocation

Profits and losses are to be allocated 85% to shareholders in proportion to their relative capital contributions and 15% to the Manager, except for items of expense, loss, deduction and credit that are attributable to the expenditure of shareholders’ capital contributions, which are allocated 99% to shareholders and 1% to the Manager.

Non-Cash Financing Transactions

Approximately $12 thousand of syndication costs have been accrued and $60 thousand of share purchases are recorded as subscription receivables at December 31, 2006.

3. Recent Accounting Standards

In February 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”), which permits entities to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. An entity would report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The decision about whether to elect the fair value option is applied instrument by instrument, with a few exceptions; the decision is irrevocable; and it is applied only to entire instruments and not to portions of instruments. The statement requires disclosures that facilitate comparisons (a) between entities that choose different measurement attributes for similar assets and liabilities and (b) between assets and liabilities in the financial statements of an entity that selects different measurement attributes for similar assets and liabilities. SFAS No. 159 is effective for financial statements issued for fiscal years beginning after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year provided the entity also elects to apply the provisions of SFAS No. 157, “Fair Value Measurements,” (“SFAS No.157”). Upon implementation, an entity shall report the effect of the first remeasurement to fair value as a cumulative-effect adjustment to the opening balance of retained earnings/accumulated deficit. Since the provisions of SFAS No.159 are applied prospectively, any potential impact will depend on the instruments selected for fair value measurement at the time of implementation. The Fund does not believe that its financial position, results of operations or cash flows will be impacted by the adoption of SFAS No. 159.

F-9

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (“SFAS No. 157”), which applies under most other accounting pronouncements that require or permit fair value measurements.  SFAS No. 157 provides a common definition of fair value as the price that would be received to sell an asset or paid to transfer a liability in a transaction between market participants.  The new standard also provides guidance on the methods used to measure fair value and requires expanded disclosures related to fair value measurements.   SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007.  The Fund does not believe that its financial position, results of operations or cash flows will be impacted by the adoption of SFAS No. 157.

In September 2006, the SEC Staff issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” (“SAB No. 108”) in an effort to address diversity in the accounting practice of quantifying misstatements and the potential for improper amounts on the balance sheet. Prior to the issuance of SAB No. 108, the two methods used for quantifying the effects of financial statement errors were the rollover and iron curtain methods. Under the rollover method, the primary focus is the income statement, including the reversing effect of prior year misstatements. The iron curtain method focuses on the effect of correcting the ending balance sheet, with less importance on the reversing effects of prior year errors in the income statement. SAB No. 108 establishes a dual approach which requires the quantification of the effect of financial statement errors on each financial statement, as well as related disclosures. Public companies are required to record the cumulative effect of initially adopting the dual approach method in the first year ending after November 16, 2006 by recording any necessary corrections to asset and liability balances with an offsetting adjustment to the opening balance of retained earnings. The use of this cumulative effect transition method also required detailed disclosures of the nature and amount of each error being corrected and how and when they arose. The Fund has adopted the provisions of SAB No. 108 and there was no impact to its financial position, results of operations and cash flows as a result of this pronouncement.

4. Unproved Properties - Capitalized Exploratory Well Costs

Leasehold acquisition and exploratory drilling costs are capitalized pending determination of whether the well has found proved reserves. Unproved properties are assessed on a quarterly basis by evaluating and monitoring if sufficient progress is made on assessing the reserves. Capitalization costs are expensed as dry-hole costs in the event that reserves are not found or are not in sufficient quantities to complete the well and develop the field. Dry-hole costs were $26.8 million for the year ended December 31, 2006.

The following table reflects the net changes in unproved properties for the year ended December 31, 2006. As of December 31, 2006, the Fund had no capitalized exploratory well costs greater than one year.

F-10

	December 31,
	2006
	(in thousands)
Balance - Beginning of the period	$	-
Additions to capitalized exploratory well costs
pending the determination of proved reserves		641
Reclassifications to proved properties based on
the determination of proved reserves
Capitalized exploratory well costs charged to
dry hole costs		-
Balance - End of the period	$	641

5. Short-term Investments in Marketable Securities inclusive of Salvage Fund

Short-term investments are comprised of US Treasury Notes with maturities greater than three months and are considered held-to-maturity investments. Held-to-maturity securities are those investments that the Fund has the ability and intent to hold until maturity. Held-to maturity investments are recorded at cost plus accrued income, adjusted for the amortization of premiums and discounts, which approximate market value. Interest income is accrued as earned. The current fair value of the Fund’s held to maturity investments, including salvage fund, is $34.1 million, which have unrecognized holding gains of $15 thousand. US Treasury Notes mature in January, May and June 2007.

6. Distributions

Distributions to shareholders are allocated in proportion to the number of shares held.

The Manager will determine whether Available Cash from Operations, as defined in the Fund’s Operating Agreement, is to be distributed. Such distribution will be allocated 85% to the shareholders and 15% to the Manager, as defined in the Fund’s Operating Agreement.

Available Cash from Dispositions, as defined in the Fund’s Operating Agreement, will be paid 99% to shareholders and 1% to the Manager until the shareholders have received total distributions equal to their capital contributions. After shareholders have received distributions equal to their capital contributions, 85% of Available Cash from Dispositions will be distributed to shareholders and 15% to the Manager.

There have been no distributions made by the Fund.

7. Related Parties

Ridgewood Energy Corporation, the Manager, was paid a one time investment fee of 4.5% of initial capital contributions. Fees are payable for services of investigating and evaluating investment opportunities and effecting transactions and are expensed as incurred. For the year ended December 31, 2006 investment fees were approximately $5.6 million, of which $12 thousand was included in due to affiliates at December 31, 2006.

A management agreement provides that the Manager render management, administrative and advisory services. For such services, the Manager receives an annual management fee, payable monthly, of 2.5% of total capital contributions. Management fees of approximately $2.4 million were incurred and paid for the year ended December 31, 2006. The Manager changed its policy regarding the calculation of the management fees effective January 1, 2007. See Note 11. Subsequent Events.

The Manager was paid an offering fee which approximated 3.5% of capital contributions directly related to offer and sale of shares of the Fund. Such offering fee was included in syndication costs (Note 2) of $14.2 million. For the year ended December 31, 2006, offering fees were approximately $4.4 million. Of this amount, $9 thousand was included in due to affiliates at December 31, 2006.

F-11

From time to time, short-term payables and receivables, which do not bear interest, arise from transactions with affiliates in the ordinary course of business. There were no outstanding payables or receivables related to these transactions at December 31, 2006.

In 2006, Ridgewood Securities Corporation, a registered broker-dealer affiliated with the Manager, was paid selling commissions and placement fees of approximately $0.2 million and $1.2 million, respectively, for shares sold of the Fund which are reflected in syndication costs (Note 2). At December 31, 2006, approximately $2 thousand was included in due to affiliates.

None of the compensation to be received by the Manager has been derived as a result of arm’s length negotiations.

The Fund has working interest ownership in certain projects to acquire and develop oil and natural gas projects with other entities that are likewise managed by the Manager.

8. Fair Value of Financial Instruments

At December 31, 2006, the carrying value of cash and cash equivalents, short-term investments in marketable securities, and salvage fund, approximate fair value.

9. Commitments and Contingencies

Environmental Considerations

The exploration for and development of oil and natural gas involves the extraction, production and transportation of materials which, under certain conditions, can be hazardous or cause environmental pollution problems. The Manager and the Operators are continually taking action they believe appropriate to satisfy applicable federal, state and local environmental regulations and do not currently anticipate that compliance with federal, state and local environmental regulations will have a material adverse effect upon capital expenditures, results of operations or the competitive position of the Fund in the oil and natural gas industry. However, due to the significant public and governmental interest in environmental matters related to those activities, the Manager cannot predict the effects of possible future legislation, rule changes, or governmental or private claims. At December 31, 2006, there were no known environmental issues that required the Fund to record a liability.

Insurance Coverage

The Fund is subject to all risks inherent in the exploration for and development of oil and natural gas. Insurance coverage as is customary for entities engaged in similar operations is maintained, but losses may occur from uninsurable risks or amounts in excess of existing insurance coverage. The occurrence of an event which is not insured or not fully insured could have an adverse impact upon earnings and financial position.

10. Information about Oil and Natural Gas Producing Activities

In accordance with Statement of Financial Accounting Standards No. 69, “Disclosures about Oil and Gas Producing Activities,” this section provides supplemental information on oil and natural gas exploration and producing activities of the Fund. Tables I and II provide historical cost information pertaining to capitalized costs, costs incurred in exploration, property acquisitions and development, and results of operations. As of December 31, 2006, the Fund did not have any proved reserves to warrant additional disclosures.

The Fund is engaged solely in oil and natural gas activities, all of which are located in the United States offshore waters of Texas, Louisiana Alabama in the Gulf of Mexico.

F-12

Table I - Capitalized Costs Related to Oil and Gas Producing Activities
	December 31,
	2006
Proved oil and gas properties	$	-
Unproved oil and gas properties		641
Advances to operators for working interests and expenditures		-
Total oil and gas properties	$	641
Table II - Costs Incurred in Exploration, Property Acquisitions and Development
		For the year ended December 31, 2006
Exploratory drilling costs - capitalized	$	641
Exploratory drilling costs - expensed		26,783
	$	27,424

11. Subsequent Events

Management Fee

Effective January 1, 2007, the Manager has changed its policy regarding the annual management fee. Commencing in January 2007, the management fee payable will be equal to 2.5% of the total shareholder capital contributions, net of cumulative dry-hole expenses incurred by the Fund. For the Fund, the management fee will be reduced by $56 thousand per month, based upon dry-hole expenses of $26.8 million through December 31, 2006.

Garden Banks 346/390

In March 2007, the Fund elected not to proceed with the completion of the Garden Banks 346/390 project, thereby resulting in a dry-hole determination for this property. In August 2006, oil had been discovered in one of the three potential reservoirs, however, a sidetrack would be necessary to extract economically viable reserve amounts. A sidetrack was completed unsuccessfully in August 2006 and a second sidetrack would be required to achieve commercially viable quantities. The Fund performed an analysis of the expenses associated with the second sidetrack relative to other opportunities in which the Fund may elect to invest. In March 2007, the Fund made the decision to leave the Garden Banks 346/390 well plugged in order to allocate its remaining funds to West Cameron 75. The Fund owns a 27% working interest in Garden Banks 346/390. Dry-hole costs related to Garden Banks 346/390, including plug and abandonment expenses, incurred by the Fund for the year ended December 31, 2006 were approximately $19.9 million. During 2007, the Fund incurred an additional $0.6 million of dry-hole expense related to this property.

.

F-13

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.

	RIDGEWOOD ENERGY S FUND, LLC
Date: April 23, 2007	By:	/s/ ROBERT E. SWANSON
		Robert E. Swanson
		Chief Executive Officer
		(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Capacity	Date
/s/ ROBERT E. SWANSON	Chief Executive Officer	April 23, 2007
Robert E. Swanson	(Principal Executive Officer)
/s/ KATHLEEN P. MCSHERRY	Senior Vice President and Chief Financial Officer	April 23, 2007
Kathleen P. McSherry	(Principal Accounting Officer)

EX-3.1

                                                                     EXHIBIT 3.1

                                    Delaware                           PAGE 1
                                    --------
                                 The First State



     I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY "RIDGEWOOD ENERGY S FUND, LLC" IS DULY FORMED UNDER THE LAWS OF
THE STATE OF DELAWARE AND IS IN GOOD STANDING AND HAS A LEGAL EXISTENCE SO FAR
AS THE RECORDS OF THIS OFFICE SHOW, AS OF THE TENTH DAY OF MAY, A.D. 2006.
     AND I DO HEREBY FURTHER CERTIFY THAT THE ANNUAL TAXES HAVE NOT BEEN
ASSESSED TO DATE.
















                                       /s/ Harriet Smith Windsor
                            [SEAL]     -------------------------
                                       Harriet Smith Windsor, Secretary of State

   4080170  8300                         AUTHENTICATION: 4736468

   060443891                                       DATE: 05-10-06




                                    Delaware                  PAGE 1
                                    --------
                                 The First State


     I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "RIDGEWOOD ENERGY S FUND, LLC", FILED IN THIS OFFICE ON THE EIGHTH
DAY OF MARCH, A.D. 2006, AT 8:08 O'CLOCK P.M.



















                                      /s/ Harriet Smith Windsor
                          [SEAL]      -------------------------
                                      Harriet Smith Windsor, Secretary of State
   4080170  8100                        AUTHENTICATION: 4582059

   060230041                                      DATE: 03-10-06





     State of Delaware
     Secretary of State
  Division of Corporations
Delivered 08:36 PM 03/08/2006
  FILED 08:08 PM 03/08/2006
SRV 060230041 - 4080170 FILE

                                State of Delaware
                            Certificate of Correction
                         of a Limited Liability Company
                    to be filed pursuant to Section 18-211(a)

     5.   The name of the Limited Liability Company is Ridgewood Energy S Fund,
          LLC.

     6.   That a Certificate of Formation was filed by the Secretary of State of
          Delaware on the 19th Day of December, 2005, and that said Certificate
          requires correction as permitted by Section 18-211 of the Limited
          Liability Company Act.

     7.   The inaccuracy or defect of said Corporation is:  Paragraph 2
          identifies the wrong registered agent.

     8.   The Certificate is hereby corrected to read as follows:

           "1.  The name of the limited liability company is Ridgewood Energy S
                Fund, LLC.

            4.  The address of its registered office in the State of Delaware is
                Christiana Corporate Services, Inc., 1314 King Street, in the
                City of Wilmington, County of New Castle. The name of its
                registered agent at such address is Christiana Corporate
                Services.

            5.  Pursuant to Section 18-215(b) of the Delaware Limited Liability
                Company Act, 6 Del. C. ss. 18-101 et seq., the debts,
                liabilities, obligations and expenses incurred by, contracted
                for or otherwise existing with respect to a particular series of
                the Company, whether such series is now authorized and existing
                pursuant to the Limited Liability Company Agreement of the
                Company or is hereafter authorized and existing pursuant to the
                Limited Liability Company Agreement, shall be enforceable
                against the assets associated with that series thereof, and none
                of the debts, liabilities, obligations and expenses incurred,
                contracted for or otherwise existing with respect to the Company
                generally or any other series thereof shall be enforceable
                against the assets of such series."

     IN WITNESS WHEREOF, the undersigned has executed this Certificate of
     Correction on the 7th day of March, 2006.

                                            /s/ Kathleen McSherry
                                            ---------------------
                                            Kathleen McSherry, Authorized Person




                                    Delaware                    PAGE 1
                                    --------
                                 The First State


     I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE
CERTIFICATE OF FORMATION OF "RIDGEWOOD ENERGY S FUND, LLC", FILED IN THIS
OFFICE ON THE NINETEENTH DAY OF DECEMBER, A.D. 2005, AT 8:06 O'CLOCK P.M.
















                                       /s/ Harriet Smith Windsor
                          [SEAL]       -------------------------
                                       Harriet Smith Windsor, Secretary of State
   4080170  8100                         AUTHENTICATION: 4390551

   051039145                                       DATE: 12-20-05




                                                         State of Delaware
                                                         Secretary of State
                                                     Division of Corporations
                                                   Delivered 08:15 PM 12/19/2005
                                                     FILED 08:06 PM 12/19/2005
                                                   SRV 051039145 - 4080170 FILE


                            CERTIFICATE OF FORMATION

                                       OF

                          RIDGEWOOD ENERGY S FUND, LLC

     1.   The name of the limited liability company is Ridgewood Energy S Fund,
          LLC.

     2.   The address of its registered office in the State of Delaware is
          Corporation Trust Center, 1209 Orange Street, Wilmington, County of
          New Castle, Delaware 19801. The name of its registered agent at such
          address is The Corporation Trust Company.

     3.   Pursuant to Section 18-215(b) of the Delaware Limited Liability
          Company Act, 6 Del.C. ss. 18-101 et seq., the debts, liabilities,
          obligations and expenses incurred by, contracted for or otherwise
          existing with respect to a particular series of the Company, whether
          such series is now authorized and existing pursuant to the Limited
          Liability Company Agreement of the Company or is hereafter authorized
          and existing pursuant to the Limited Liability Company Agreement,
          shall be enforceable against the assets associated with that series
          thereof, and none of the debts, liabilities, obligations and expenses
          incurred, contracted for or otherwise existing with respect to the
          Company generally or any other series thereof shall be enforceable
          against the assets of the such series.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of Ridgewood Energy S Fund, LLC this 13th day of December, 2006.



                                         By /s/ Kathleen McSherry
                                            ---------------------
                                            Kathleen McSherry, Authorized Person





                            CERTIFICATE OF FORMATION

                                       OF

                          RIDGEWOOD ENERGY S FUND, LLC

     1.   The name of the limited liability company is Ridgewood Energy S Fund,
          LLC.

     2.   The address of its registered office in the State of Delaware is
          Christiana Bank & Trust Company, 1314 King Street, in the City of
          Wilmington, County of New Castle. The name of its registered agent at
          such address is The Corporation Trust Company.

     3.   Pursuant to Section 18-215(b) of the Delaware Limited Liability
          Company Act, 6 Del. C. ss. 18-101 et seq., the debts, liabilities,
          obligations and expenses incurred by, contracted for or otherwise
          existing with respect to a particular series of the Company, whether
          such series is now authorized and existing pursuant to the Limited
          Liability Company Agreement of the Company or is hereafter authorized
          and existing pursuant to the Limited Liability Company Agreement,
          shall be enforceable against the assets associated with that series
          thereof, and none of the debts, liabilities, obligations and expenses
          incurred, contracted for or otherwise existing with respect to the
          Company generally or any other series thereof shall be enforceable
          against the assets of the such series.

     IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of Ridgewood Energy S Fund, LLC this 13th day of December, 2005.



                                        By  Kathleen McSherry
                                            -----------------
                                            Kathleen McSherry, Authorized Person

EX-3.2

                                                                     EXHIBIT 3.2

                             LLC OPERATING AGREEMENT

                       LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

                          RIDGEWOOD ENERGY S FUND, LLC

     THIS LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement") is made and
entered as of February 1, 2006 by and among Ridgewood Energy Corporation, a
Delaware corporation ("Manager"), and the Investors as defined below.

     WHEREAS, the Manager has formed and the Investors have agreed to become
members of RIDGEWOOD ENERGY S FUND, LLC, a Delaware limited liability company
(the "Fund") and the Manager has caused a certificate of formation to be
executed and filed with the Delaware Secretary of State pursuant to Section
18-201 of the Delaware Limited Liability Company Act ("Delaware Act").

     NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions contained herein, the parties agree as follows:

                       ARTICLE 1: ORGANIZATION AND POWERS

     1.1 Name. The name of the Fund is "RIDGEWOOD ENERGY S FUND, LLC". The
Manager may conduct the business of the Fund or hold its property under other
names as necessary to comply with law or to further the affairs of the Fund, as
it deems advisable in its sole discretion. This Agreement, the Certificate and
any other documents, and any amendments of any of the foregoing, required by law
or appropriate, shall be recorded in all offices or jurisdictions where the Fund
shall determine such recording to be necessary or advisable for the conduct of
the business of the Fund.

     1.2 Purpose (a) The Fund's purpose is to acquire, drill, construct and
develop natural gas and oil prospects, including infrastructure projects, in
shallow and deep offshore waters in the Gulf of Mexico ("Projects"). In addition
to these acquisition and development activities, the Fund may participate in
pre-development and other preparatory activities for the Projects, including
without limitation, evaluation, investigation, due diligence activities,
permitting, and other development activities. The Fund may effect any of these
transactions on its own, together with Affiliates, or together with
non-Affiliates, and may do so with the encouragement or consent of management or
controlling equity holders of the entity it invests in or without such consent.



     (b) In carrying out its purposes, the Fund has the power to perform any act
that is necessary, advisable, customary or incidental thereto. It may invest in
a passive or active manner in, develop, plan, construct, manage, operate,
advise, transfer or dispose of, any facility or interest and produce or market
products or services. The Fund may act independently, through subsidiary
organizations, in cooperation with others or through business entities in which
others have interests whether as principal, agent, partner, owner, member,
associate, joint venturer or otherwise. When related to its purposes, the Fund
may also guarantee obligations of other persons, supply collateral for those
obligations or for the issuance of letters of credit or surety bonds benefiting
other persons, enter into leases as lessor or lessee or acquire goods or
services for the use or benefit of other persons.

     (c) Without the prior affirmative vote or written consent of Investors
whose aggregate Capital Contributions constitute more than 50% of all Capital
Contributions to the Fund at such time, the Fund will not take any action that
would cause it to be required to register as an "investment company" subject to
the requirements of the Investment Company Act of 1940 and will not hold itself
out as an "investment company."

     (d) The Fund may make interim investments of funds and may take all action
necessary, advisable or appropriate to maintain its existence, enforce this
Agreement and its rights or the rights of the Shareholders and comply with legal
requirements.

     1.3 Relationships among Shareholders; No Partnership. As among the Fund,
the Shareholders and the officers and agents of the Fund, a limited liability
company and not a partnership is created by this Agreement and the Certificate
irrespective of whether any different status may be held to exist for tax
purposes. The Shareholders hold only the relationship of members of the Fund
with only such rights as are conferred on them by this Agreement and the
Delaware Act.

     1.4 Organization Certificates. The parties hereto have or shall cause to be
executed and filed (a) the Certificate, (b) such certificates as may be required
by so-called "assumed name" laws in each jurisdiction in which the Fund has a
place of business, (c) all such other certificates, notices, statements or other
instruments required by law or appropriate for the formation and operation of a
Delaware limited liability company in all jurisdictions where the Fund may elect
to do business, and (d) any amendments of any of the foregoing required by law
or otherwise appropriate.

     1.5 Principal Place of Business. The principal place of business of the
Fund shall be 1314 King Street, Wilmington, Delaware 19801, or such other place
as the Fund may designate from time to time by notice. The Fund may maintain

                                       2


such other offices at such other places as the Fund may determine to be in the
best interests of the Fund.

     1.6 Admission of Investors. (a) The Fund shall have the unrestricted right
at all times prior to the Termination Date to admit to the Fund such Investors
as it may deem advisable. One Investor Share will be issued for each accepted
subscription for $150,000 of Capital Contributions (before discounts or
incentives) and fractional Shares may be issued in the Manager's sole discretion
for proportional amounts of Capital Contributions. After the Termination Date,
Section 9.6 shall govern the sale of Shares or different classes of Shares.

     (b) The aggregate subscriptions received for Capital Contributions of the
Investors and accepted by the Fund will not exceed 1,000 Investor Shares
($150,000,000), immediately following the admission of such Investors. However,
at any time prior to the Termination Date, the Manager in its sole discretion
may increase the number of Investor Shares to 1,335 Investor Shares or more.

     (c) (i) If, by the close of business on July 31, 2006, Investor Shares
representing Investor Capital Contributions in the aggregate amount of at least
$1,500,000 have not been sold, the Fund shall be immediately dissolved at the
expense of the Manager and all subscription funds shall be forthwith returned to
the respective subscribers together with any interest earned thereon.

         (ii) If the Fund withdraws the Offering after the Fund has received
Investor Shares representing Investor Capital Contributions in the aggregate
amount of at least $1,500,000, but before the Termination Date, the Fund shall
be immediately dissolved at the expense of the Manager and all subscription
funds, net of third party fees, shall be returned to the respective subscribers
together with any interest earned thereon. For purposes of this Section 1.6(c)
(ii), third party fees do not include any fees paid to the Manager or its
affiliates.

         (iii) All funds received from such subscriptions until used by the Fund
will be deposited in the Fund's name in an escrow account at a commercial bank.

     (d) Each Investor shall execute a Subscription Agreement and will make a
Capital Contribution to the Fund equal to $150,000 per Investor Share. The Fund
may accept or reject any subscription in whole or in part in its sole
discretion. Each Investor who executes an accepted Subscription Agreement shall
be admitted to the Fund as a Shareholder.

     (e) The Capital Contribution for Investor Shares must be paid to the Fund
at the time of subscription.

     1.7 Term of the Fund. For all purposes, this Agreement shall be effective
on and after its date and the Fund shall continue in existence until December


                                       3


31, 2045 at which time the Fund shall terminate unless sooner terminated under
any other provision of this Agreement.

     1.8 Powers of the Fund. Without limiting any powers granted to the Fund
under this Agreement or applicable law, in carrying out its purposes the Fund
has all powers granted to a limited liability company organized under the
Delaware Act, including, without limitation:

     (a) To borrow money or to loan money and to pledge or mortgage any and all
Fund Property, to execute and provide guarantees, to execute conveyances,
mortgages, security agreements, assignments and any other contract or agreement
deemed proper and in furtherance of the Fund's purposes and affecting it or any
Fund Property; provided, however, that the Fund shall not loan money to the
Manager, or any other Managing Person;

     (b) To pay all indebtedness, taxes and assessments due or to be due with
regard to Fund Property and to give or receive notices, reports or other
communications arising out of or in connection with the Fund's business or Fund
Property;

     (c) To collect all monies due the Fund;

     (d) To establish, maintain and supervise the deposit of funds or Fund
Property into, and the withdrawals of the same from, Fund bank accounts or
securities accounts;

     (e) To employ accountants to prepare required tax returns and provide other
professional services and to pay their fees at the Fund's expense;

     (f) To make any election relating to adjustments in basis on behalf of the
Fund or the Shareholders which is or may be permitted under the Code,
particularly with respect to Sections 743, 754 and 771 of the Code;

     (g) To employ legal counsel for Fund purposes or for the Manager, or permit
the Manager itself to employ legal counsel, for Fund and other purposes
permitted hereunder and to pay their fees and expenses at the Fund's expense;
and

     (h) To invest in any asset consistent with the objectives of the Fund as
described in the Memorandum.

                             ARTICLE 2: DEFINITIONS

     The following terms, whenever used herein, shall have the meanings assigned
to them in this Article 2 unless the context clearly indicates otherwise.

                                       4


References to sections and articles without further qualification denote
sections and articles of this Agreement. The singular shall include the plural
and the masculine gender shall include the feminine, and vice versa, as the
context requires, and the terms "person" and "he" and their derivations whenever
used herein shall include natural persons and entities, including, without
limitation, corporations, partnerships, limited liability companies and trusts,
unless the context indicates otherwise.
     "Act"---The federal Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
     "Adjusted Capital Account Deficit"--- with respect to any Shareholder, the
deficit balance, if any, in such Shareholder's Capital Account as of the end of
the relevant Fiscal Year, with the following adjustments:

A credit to such Capital Account of any amounts which such Shareholder is
obligated to restore pursuant to any provision of this Agreement or is deemed
obligated to restore pursuant to the penultimate sentences of Regulations
Section 1.704-2(g)(1) and 1.704-2(i)(5); and

A debit from such Capital Account for the items described in Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.

The foregoing definition of "Adjusted Capital Account Deficit" is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations.

     "Affiliate"---An "Affiliate" of, or person "Affiliated" with, a specified
person is a person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
person specified.
     "Agreement"---This Limited Liability Company Agreement, as further amended
from time to time.
     "Available Cash from Capital Transactions"-- The amount by which (a) the
sum of (i) the total cash proceeds received by the Fund in connection with
Capital Transactions (other than Available Cash From Temporary Investments),
plus (ii) the proceeds of any insurance payments or financing transactions that
are not otherwise used to construct, replace or repair Fund Property, exceed (b)
the amount that the Manager determines is necessary to be retained by the Fund
(i) to satisfy any debt or other obligation of the Fund that is secured by,
attributable to or otherwise connected with the Fund Property disposed of
(including Shareholder loans, if any) and (ii) to establish reasonable reserves
for actual or contingent obligations of the Fund.
     "Available Cash from Operations"--- The total cash received by the Fund
from operation of the business in the ordinary course (but excluding any
Available Cash from Capital Transactions, Available Cash from Temporary
Investments, and any Investor Capital Contributions), less (i) all operating
expenses and other cash expenditures, and (ii) such reserves for operating

                                        5



expenses, debt service and other actual or contingent obligations and
liabilities of the Fund as the Manager may determine are necessary or advisable.
     "Available Cash from Temporary Investments" --- The total cash received by
the Fund from Temporary Investments.
     "Capital Account"---The amount representing a Shareholder's capital
interest in the Fund, as determined under Article 6 hereof.
     "Capital Contributions"---The aggregate capital contributions of the
Investors accepted by the Fund in payment of the purchase price of one or more
whole or fractional Investor Shares, minus any return of capital by the Fund
pursuant to Section 5.3.
     "Capital Transactions" means a transaction involving, related to or in
connection with the acquisition, transfer, injury, distribution, condemnation,
or other disposition of Fund property or interest therein (other than Temporary
Investments) that is made other than in the ordinary course of the Fund's
business, specifically including but not limited to, transactions involving,
related to or in connection with the drilling and development of Projects (i.e.,
natural gas or oil wells).
     "Certificate"---The Certificate of Formation of the Fund, as amended from
time to time.
     "Code"---The United States Internal Revenue Code of 1986, as amended from
time to time, or any corresponding provision or provisions of any succeeding law
and, to the extent applicable, any rules and regulations promulgated thereunder.
     "Delaware Act"---The Delaware Limited Liability Company Act, as amended
from time to time (currently codified as Title 6, Chapter 18 of the Delaware
Code).
     "Dry-Hole Costs" --- The cost of drilling a well.
     "Escrow Date" --- The later of the dates on which the Fund (i) accepts
Investor subscriptions of at least $1,500,000 in the aggregate, and (ii) has in
deposit at least $1,500,000 in collected funds in escrow under Section 1.6(c),
provided, however, the Escrow Date shall not be later than July 31, 2006.
     "Fiscal Year"---The calendar year ending December 31st.
     "Fund"---Ridgewood Energy S Fund, LLC, a Delaware limited Liability
Company.
     "Fund Property" --- All property owned or acquired by the Fund.
     "Investor"---A purchaser of whole or fractional Investor Shares (which will
include the Manager to the extent it acquires Investor Shares for its own
account) whose subscription is accepted by the Fund.
     "Investor Share" --- An Investor Share in the Fund representing a required
Capital Contribution (before any discounts or waivers of fees) of $150,000.
     "Management Share" - The equity interest in the Net Profits and Net Losses
of the Fund and in distributions granted to Ridgewood as compensation for
organizing and sponsoring the Fund and acting as its Manager.

                                       6


     "Managing Person"---Any of the following: (a) Fund officers, agents,
consultants or Affiliates, the Manager and (b) any directors, trustees,
officers, agents or Affiliates of any organizations named in (a), above, when
acting on behalf of the Fund.
     "Manager"-- Ridgewood Energy Corporation and any successor, substitute or
different Manager under this Agreement.
     "Memorandum"---The Confidential Memorandum dated February 1, 2006 of the
Fund, as the same may be amended or supplemented from time to time.
     "Net Profits" or "Net Losses"---For a given fiscal period, an amount equal
to the taxable income or loss for such period, determined in accordance with
Code Section 703(a) (for this purpose, all items of income, gain, expense, loss,
deduction or credit required to be stated separately pursuant to Code Section
703 (a)(1) shall be included in taxable income or loss), with the following
adjustments:
         (a) Any income that is exempt from federal income tax and not otherwise
taken into account in computing Net Profits or Net Losses pursuant to this
definition and any income and gain described in Regulation Section 1.704-1
(b)(2)(iv)(g) shall be added to such taxable income or loss;
         (b) Any expenditures described in Code Section 705 (a)(2)(B) or treated
as Code Section 705(a)(2)(B) expenditures pursuant to Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
Profits or Net Losses pursuant to this definition shall be subtracted from such
taxable income or loss;
         (c) In the event of a distribution in kind under Section 8.4, the
amount of any unrealized gain or loss deemed to have been realized on the
property distributed shall be added or subtracted from such taxable income or
loss; and
         (d) Notwithstanding any other provision of this definition, any items
that are specially allocated pursuant to Sections 4.2 and 7.4 shall not be taken
into account in computing Net Profits or Net Losses.
     "Net Profits from Capital Transactions" or "Net Losses from Capital
Transactions" - means for any given fiscal period, an amount equal to the Net
Profits or Net Losses, as the case may be, resulting from Capital Transactions
     "Net Profits from Operations" or "Net Losses from Operations" --- For a
given fiscal period, an amount equal to the Net Profits or Net Losses, as the
case may be, from operation of the business in the ordinary course (but
excluding Net Profits from Capital Transactions, Net Losses from Capital
Transactions, and Net Profits from Temporary Investments).
     "Net Profits from Temporary Investments" --- For a given fiscal period, an
amount equal to the Net Profits attributable to Temporary Investments.
     "1940 Act"---The federal Investment Company Act of 1940, as amended,
and the rules and regulations promulgated thereunder.
     "Non-recourse Deductions"---Shall have the meaning set forth in Regulations
Section 1.704-2(b)(1) and 1.704-2(c).
     "Non-recourse Liability"--- Shall have the meaning set forth in Regulations
Section 1.752-1(a)(2).

                                       7


     "Partnership Minimum Gain" --- Shall have the meaning set forth in
Regulations Section 1.704-(2)(b)(2) and 1.704-2(d).
     "Placement Agent"---Ridgewood Securities Corporation, a Delaware
corporation, or any successor.
     "Projects" a natural gas or oil project in which the Fund may invest.
     "Regulation"---A final or temporary Treasury regulation promulgated under
the Code.
     "Ridgewood Energy Corporation" or "Ridgewood" -- Ridgewood Energy
Corporation, a Delaware corporation.
     "Salvage Fund" --- As used herein shall have the meaning set forth in
Section 9.6.
     "Shareholder" --- The Investors and the owner of the Management Share. The
Shareholders are the members of the Fund.
     "Share"---A Shareholder's interest as a member of the Fund.
     "Subscription Agreement"---The form of subscription agreement (contained in
Exhibit D to the Memorandum, which is separately bound) which each prospective
Investor must complete and execute in order to subscribe for an interest in the
Fund.
     "Supplemental Offering" --- A supplemental offering of a class or series of
Shares by the Fund at a date to be determined and as further described in
Section 9.8.
     "Temporary Investments" --- The investments by the Company in: (a)
securities that are obligations of or guaranteed by the U.S. government or an
instrumentality thereof; (b) domestic, corporate or governmental indebtedness
rated Aa or Prime-1 (or the equivalent thereof) or better by Moody's Investors
Service Inc. or A-I (or its equivalent) or better by Standard & Poor's
Corporation; (c) certificates of deposit, money market accounts, savings
accounts, checking accounts or any combination thereof in banks which have total
assets of $100,000,000 or more (or in banks insured by the Federal Deposit
Insurance Corporation (the "FDIC") which have total assets of less than
$100,000,000 if the amount of the Company's funds deposited in such bank is
fully insured by the FDIC); or (d) any other securities that the Manager
determines are appropriate for short term investments.
     "Termination Date" --- The date on which the initial offering of Investor
Shares is ended, as set or extended from time to time by the Fund in its sole
discretion, provided that the Termination Date may not occur before the Escrow
Date, and that if the Offering is withdrawn, the Termination Date is the date
the Fund elects to do so. In no event shall the Termination Date extend beyond
ninety (90) days beyond July 31, 2006.
     "Working Interest" --- For purposes of this Agreement, a Working Interest
is an interest under a natural gas well, which carries with it the obligation to
pay the costs of the operation of such well. The holders of the entire Working
Interest bear 100% of the costs of exploring, drilling, developing and operating
the well and are entitled to receive revenues derived from the natural gas

                                       8


production of the well which remain after deduction of the cost of processing,
transporting and marketing such natural gas, including royalty payments.

                             ARTICLE 3: LIABILITIES

     3.1 Liability of Investors in General. No Investor shall be personally
liable for any debt, obligation, or liability of the Fund whether arising in
contract, tort or otherwise, in any amount beyond the unpaid amount, if any, of
the Capital Contribution subscribed for by him, solely by reason of being a
Shareholder of the Fund.

     3.2 Liability of Investors to Fund and Shareholders. No Investor in his
capacity as such shall be liable, responsible or accountable in damages or
otherwise to any other Shareholder or the Fund for any claim, demand, liability,
cost, damage or cause of action of any nature whatsoever that arises out of or
that is incidental to the management of the Fund's affairs.

     3.3 Liability of Managing Persons to Third Persons, Fund and Shareholders.
No Managing Person shall be liable to any person other than the Fund or a
Shareholder for any obligation of the Fund. No Managing Person shall have
liability to the Fund or to any Shareholder for any loss suffered by the Fund
that arises out of any action or inaction of the Managing Person if the Managing
Person, in good faith, determined that such course of conduct was in the Fund's
best interest and such course of conduct did not constitute bad faith, gross
negligence or willful misconduct of such Managing Person. Nothing in this
Section 3.3, however, shall limit or supersede any contractual or other defenses
a Managing Person may have against the Fund or a Shareholder.

     3.4 Indemnification of Managing Persons. (a) Each Managing Person shall be
indemnified from Fund Property against any losses, liabilities, judgments,
expenses and amounts paid in settlement of any claims sustained by him in
connection with the Fund or claims by the Fund, in right of the Fund or by or in
right of any Shareholder. The Manager shall have full and complete discretion to
authorize indemnification of any Managing Person consistent with the
requirements of section 3.3 and other sections of this Agreement at any time,
regardless of whether a claim is pending or threatened and regardless of any
conflict of interest between the Manager and the Fund that may arise in regard
to the decision to indemnify a Managing Person.

     (b) Expenses, including attorneys' fees, incurred by a Managing Person in
defending any action, suit or proceeding shall be paid by the Fund in advance of
the final disposition of the action, suit or proceeding upon receipt of an
undertaking by the recipient to repay such amount if it shall ultimately be
determined that the Managing Person is not entitled to be indemnified by the
Fund under this Agreement or otherwise and if it is reasonable to make the
advance.

                                       9


     (c) Rights to indemnification and advances of expenses under this Agreement
are not exclusive of any other rights to indemnification or advances to which a
Managing Person may be entitled, both as to action in a representative capacity
or as to action in another capacity taken while representing another. The
restrictions of this Article 3 do not apply to directors and officers' insurance
or any other insurance or bond by the Fund or by a Managing Person on behalf of
the Fund, nor do they apply to any claim against or proceeds of that insurance
or bond.

     (d) Each Managing Person shall be entitled to rely upon the opinion or
advice of or any statement or computation by any counsel, engineer, accountant,
investment banker or other person retained by such Managing Person or the Fund
that he believes to be within such person's professional or expert competence.
In so doing, he or she will be deemed to be acting in good faith and with the
requisite degree of care unless he or she has actual knowledge concerning the
matter in question that would cause such reliance to be unwarranted.

                    ARTICLE 4: ALLOCATION OF PROFIT AND LOSS

     4.1 General. The rules set forth below in this Article 4 shall apply for
the purposes of determining each Shareholder's allocable share of the items of
income, gain, loss and expense of the Fund comprising Net Profits or Net Losses
of the Fund for each Fiscal Year, determining special allocations of other items
of income, gain, loss and expense, and adjusting the balance of each
Shareholder's Capital Account to reflect the aforementioned general and special
allocations. For each Fiscal Year, the special allocations in Section 4.2 and
Section 7.4 hereof shall be made immediately prior to the general allocations of
Section 4.2 hereof. Allocations to the Investors shall be made in accordance
with their relative Investor Shares or in accordance with allocations applicable
to a specific class or series, if any, offered pursuant to Section 9.8.

     4.2 General Allocations.

     (a) General.

         (i) Net Profits from Operations. Except as otherwise provided in this
Section 4.2 and subject to Article 7, 8 and 9 hereof, Net Profits from
Operations shall be allocated in the following amounts and in the following
priorities:

             (A) First, to each of the Shareholders, in the amount of and in
proportion to the excess, if any, of: (i) the aggregate Net Losses allocated to
each such Shareholder pursuant to Section 4.2(a)(ii) (in reverse order in which
such Net Losses were previously allocated) for the current and all prior Fiscal

                                       10


Years; minus (ii) the aggregate Net Profits from Operations allocated to such
Shareholder pursuant to this Section 4.2(a)(i)(A) for all prior Fiscal Years;

             (B) Second, to the extent that distributions of cash are made
pursuant to Sections 8.1 and 9.7, to each of the Shareholders, in the amount of
and in a manner consistent with the distributions made pursuant to Sections 8.1
and 9.7; and

             (C) Finally, 85% to the Investors, pro rata, and 15% to the
Manager.

         (ii) Net Losses from Operations. Except as otherwise provided in this
Section 4.2 and subject to Article 7, 8 and 9 hereof, Net Losses from Operations
shall be allocated 85% to the Investors, pro rata, and 15% to the Manager.

         (iii) Net Profits from Capital Transactions. Except as otherwise
provided in this Section 4.2 and subject to Article 7, 8 and 9 hereof, Net
Profits from Capital Transactions shall be allocated in the following amounts
and in the following priorities:

             (A) First, to each of the Shareholders, in the amount of and in
proportion to the excess, if any, of: (i) the aggregate Net Losses allocated to
each such Shareholder pursuant to Section 4.2(a)(iv) (in reverse order in which
such Net Losses were previously allocated) for the current and all prior Fiscal
Years; minus (ii) the aggregate Net Profits from Operations allocated to such
Shareholder pursuant to this Section 4.2(a)(iii)(A) for all prior Fiscal Years;

             (B) Second, to the extent that distributions of cash are made
pursuant to Section 8.2, to each of the Shareholders, in the amount of and in a
manner consistent with the distributions made pursuant to Section 8.2; and

             (C) Finally, to the extent that distributions of cash is not made
pursuant to Section 8.2, to each of the Shareholders, in the amount of and in a
manner consistent with the distributions which would have been made pursuant to
Section 8.2 if distributions had been made pursuant to Section 8.2.

         (iv) Net Losses from Capital Transactions. Except as otherwise provided
in this Section 4.2 and subject to Article 7, 8 and 9 hereof, Net Losses from
Capital Transactions shall be allocated 99% to the Investors, pro rata, and 1%
to the Manager.

         (v) Net Profits from Temporary Investments. Except as otherwise
provided in this Section 4.2 and subject to Article 7, 8 and 9 hereof, Net

                                       11


Profits from Temporary Investments shall be allocated 99% to the Investors, pro
rata, and 1% to the Manager.

         (b) Loss Limitation. Notwithstanding anything to the contrary contained
in this Section 4.2, the amount of Net Losses allocated to any Shareholder shall
not exceed the maximum amount of such items that can be so allocated without
causing such Shareholder to have an Adjusted Capital Account Deficit at the end
of any Fiscal Year. All such items in excess of the limitation set forth in the
previous sentence shall be allocated first to Shareholders who would not have an
Adjusted Capital Account Deficit, pro rata, until no Shareholder would be
entitled to any further allocation, and then to the Manager.

         (c) No Deficit Restoration Obligation. Except as provided in Section
14.6, at no time during the term of the Fund or upon dissolution and liquidation
thereof shall a Shareholder with a negative balance in his, her or its Capital
Account have any obligation to the Fund or the other Shareholders to restore
such negative balance, except as may be required by law.

         (d) Items. Except as otherwise provided in this Agreement, all items of
Fund income, gain, expense, loss, and deduction for a particular Fiscal Year and
any other allocations not otherwise provided for shall be divided among the
Shareholders in the same proportions as they share Net Profits or Net Losses, as
the case may be, for such Fiscal Year.

         (e) Tax Reporting. The Shareholders shall be bound by the provisions of
this Agreement in reporting their shares of Fund Net Profits, Net Losses and
other items for income tax purposes.

         (f) Allocation to Fiscal Periods. The Fund may use any permissible
method under Code Section 706(d) and the Regulations thereunder to determine Net
Profits, Net Losses and other items on a daily, monthly or other basis for any
Fiscal Year in which there is a change in a Shareholder's interest in the Fund.

         (g) Capital Account Regulations. The definition of "Capital Account"
and certain other provisions of this Agreement are intended to comply with
Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied
in a manner consistent with such Regulations. These Regulations contain
additional rules governing maintenance of Capital Accounts that may not have
been provided for in this Agreement because, in part, these rules may relate to
transactions that are not expected to occur and in some instances are prohibited
by this Agreement. If the Fund after consultation with its regular accountants
or tax counsel determines that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto, are computed in order to
comply with such Regulations, or to avoid the effects of unanticipated events
that might otherwise cause this Agreement not to comply with such Regulations,

                                       12


the Fund shall make such modification without the need of prior notice to or
consent of any Shareholder; so long as no such modification is likely to have a
material effect on the amounts distributable to any Shareholder.

         4.3 [INTENTIONALLY OMITTED.]

         4.4 Tax Allocations. The tax allocations made pursuant to this Section
4.4 shall be solely for tax purposes and shall not affect any Shareholder's
Capital Account or share of non-tax allocations or distributions under this
Agreement.

         (a) Section 704(c) Allocations. In the event any property of the Fund
is credited to the Capital Account of a Shareholder at a value other than its
tax basis, the allocations of taxable income, gain, loss and deductions with
respect to such property shall be made in a manner that will comply with Code
Section 704(b) and 704(c) and the Regulations thereunder. The Fund, in the sole
and absolute discretion of the Manager, may make, or not make, "curative" or
"remedial" allocations (within the meaning of the Regulations under Code Section
704(c) including, but not limited to:

         (i) "curative" allocations which offset the effect of the "ceiling
rule" for a prior Fiscal Year (within the meaning of Regulations Section
1.704-3(c)(3)(ii)); and

         (ii) "curative" allocations from dispositions of contributed property
(within the meaning of Regulations Section 1.704-3(c)(3(iii)(B)).

         (b) Depreciation Recapture. To the maximum extent permitted by the
Code, income realized by the Fund in the nature of recapture of depreciation or
other cost recovery allowances (other than of Non-recourse Deductions or
Shareholder Non-recourse Deductions) shall be allocated to Shareholders in the
same proportions as depreciation allowances were allocated to them.

                ARTICLE 5: CAPITAL CONTRIBUTIONS OF SHAREHOLDERS

         5.1 Additional Capital Contributions. Other than the full payment of a
Shareholder's Capital Contribution, no Shareholder of the Fund shall be required
to make additional contributions to the Fund. However, the Manager may from time
to time and within its sole discretion seek additional capital contributions
from Shareholders, and others, through a supplemental offering, as described in
Section 9.6 hereof. No Shareholder shall be required to participate in such
supplemental offering and the failure to do so shall have no impact, adverse or
otherwise, on such Shareholder's rights and obligations under this Agreement.

                                       13


         5.2 Manager's Capital Contributions. The Manager in its capacity as
Manager shall only be required to make Capital Contributions in accordance with
Section 14.6.

         5.3. Returns of Capital. If the Fund for any reason at any time does
not find it necessary or appropriate to retain or expend all Capital
Contributions, the Manager in its sole discretion may cause the Fund to return
any or all such excess Capital Contributions ratably to Investors. The Investors
will be notified of the source of the payment. The Fund is not obligated to
return the amount of any fees charged in connection with the Investor Capital
Contribution and the return of an Investor Capital Contribution is net of any
fees so charged.

                           ARTICLE 6: CAPITAL ACCOUNTS

         6.1 Capital Accounts. A Capital Account shall be established and
maintained for each Shareholder and shall be adjusted as follows:

         (a) The Capital Account of each Shareholder shall be increased by:

         (1) The amount of such Shareholder's Capital Contributions to the Fund;

         (2) The amount of Net Profits allocated to such Shareholder pursuant to
Articles 4 and 7;

         (3) The fair market value of property contributed by the Shareholder to
the Fund (net of liabilities secured by the contributed property that the Fund
under Code Section 752 is considered to have assumed or taken subject to);

         (4) Any items in the nature of income or gain that are specially
allocated to such Shareholder or adjusted pursuant to Sections 4.2 and 7.4; and

         (b) The Capital Account of each Shareholder shall be decreased by:

         (1) The amount of Net Losses allocated to such Shareholder pursuant to
Articles 4 and 7;

         (2) All amounts of money and the fair market value of property paid or
distributed to such Shareholder pursuant to the terms hereof (other than
payments made with respect to loans made by such Shareholder to the Fund), net
of liabilities secured by that property that the Shareholder under Code Section
752 is considered to have assumed or taken subject to;

         (3) Any items in the nature of expenses or losses that are specially
allocated to such Shareholder pursuant to Sections 4.2 and 7.4; and

                                       14


         (4) Any return of a Capital Contribution under Section 5.3.

         6.2 Calculation of Capital Account. Whenever it is necessary to
determine the Capital Account of any Shareholder, the Capital Account of such
Shareholder shall be determined in accordance with the rules of Regulation
Sections 1.704-1(b)(2)(iv) and 1.704-2 (as amended from time to time). If
necessary to comply with the Code, an adjusted Capital Account may be employed.

         6.3 Effect of Loans. Loans by any Shareholder to the Fund shall not be
considered contributions to the capital of the Fund.

         6.4 Withdrawal of Capital. No Shareholder shall be entitled to withdraw
any part of his Capital Account or to receive any distribution from the Fund,
except as specifically provided herein.

         6.5 Capital Accounts of New Shareholders. Any person who shall acquire
Shares in accordance with the terms and conditions of Article 13 of this
Agreement shall have the Capital Account of his transferor after adjustments
reflecting the transfer, if any, except as specifically provided herein.

         6.6 Limitation. Neither the Manager nor any other Managing Person shall
be required or shall have any personal liability to fund any or all of any
negative Capital Account of any Investor, including without limitation Investor
Capital Contributions.

           ARTICLE 7: ADDITIONAL PROVISIONS APPLICABLE TO ALLOCATIONS

         7.1 Determination of Net Profits and Loss. At the end of each Fiscal
Year, and at such other times as the Fund shall deem necessary or appropriate,
each item of Fund income, gain, expense, loss, deduction and credit shall be
determined for the period then ending and shall be allocated to the Capital
Account of each Shareholder in accordance with this Agreement. With respect to
the admission of Shareholders, the Fund will use the "interim closing date"
method of accounting as permitted by the Regulations.

         7.2 Determination of Net Profits and Loss in the Event of Transfer. In
the event that a Shareholder transfers his interest in the Fund in accordance
with the terms of this Agreement, the determination and allocation described in
Section 7.1 shall be made as of the date of such transfer and thereafter all
such allocations shall be made to the account of the transferee of such
interest; provided, however, that the Fund may determine that such determination
and allocation shall be pro rata to the Shareholders based upon the actual
number of days in such Fiscal Year that each such Shareholder held an interest
in the Fund. In the event of a pro rata determination and allocation, the

                                       15



foregoing provisions of this Section relating to a pro rata determination and
allocation will not be applicable to the distributive shares, with respect to
the Shares transferred, of items of Fund income, gain, expense, loss, deduction
and credit arising out of (a) the sale or other disposition of all or
substantially all Fund Property, or (b) other extraordinary nonrecurring items,
all of which will be allocated to the holder of such Fund interest on the date
such items of Fund income, gain, expense, loss, deduction and credit are earned
or incurred.

         7.3 Allocation of Net Profits and Net Losses. All items of income,
gain, expense, loss, deduction and credit of the Fund from operations and in the
ordinary course of operation of Fund Property shall be allocated among the
Shareholders in accordance with Article 4.

         7.4 Qualified Income Offset and Other Allocation Provisions. (a) If
there is a net decrease in "partnership minimum gain" (within the meaning of
Regulation Section 1.704-2(d)) during a fiscal period, then there shall be
allocated to each Shareholder items of income and gain for such fiscal period
(and, if necessary, subsequent fiscal periods) in proportion to, and to the
extent of, an amount equal to the portion of such Shareholder's share of the net
decrease in partnership minimum gain during such fiscal period that is allocable
to the disposition of Fund Property subject to one or more Non-recourse
Liabilities of the Fund. However, such allocation shall be reduced to the extent
(i) the Shareholder contributes capital to the Fund that is used to repay the
Non-recourse Liability and (ii) the Shareholder's share of the net decrease in
partnership minimum gain is caused by the repayment. The foregoing is intended
to be a "minimum gain chargeback" provision as described in Regulation Section
1.704-2(f), and shall be interpreted and applied in all respects in accordance
with such Regulation. If there is a net decrease in the minimum gain
attributable to a "partner non-recourse debt" (as defined in Regulation Section
1.704-2(b) (4)) for a fiscal period, then, in addition to the amounts, if any,
allocated pursuant to the first sentence of this Subsection 7.4 (a), there shall
be allocated to each Shareholder with a share of such minimum gain attributable
to a "partner non-recourse debt" items of income and gain for such fiscal period
(and, if necessary, subsequent fiscal periods) in proportion to, and to the
extent of, an amount equal to the portion of such Shareholder's share of the net
decrease in the minimum gain attributable to a partner non-recourse debt during
such fiscal period that is allocable to the disposition of Fund Property subject
to one or more Non-recourse Liabilities of the Fund. However, such amount shall
be reduced to the extent (i) the Shareholder contributes capital to the Fund
that is used to repay the Non-recourse Liability and (ii) the Shareholder's
share of the net decrease in the minimum gain attributable to a partner
non-recourse debt is caused by the repayment.

         (b) If during any fiscal period of the Fund a Shareholder unexpectedly
receives an adjustment, allocation or distribution described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases a deficit

                                       16



balance in the Shareholder's Capital Account, there shall be allocated to the
Shareholder items of income and gain (consisting of a pro rata portion of each
item of Fund income, including gross income, and gain for such period) in an
amount and manner sufficient to eliminate such deficit balance as quickly as
possible. The foregoing is intended to be a "qualified income offset" provision
as described in Regulation Section 1.704-1(b)(2)(ii)(d), and shall be
interpreted and applied in all respects in accordance with such Regulation.

         (c) Notwithstanding anything to the contrary in Article 4 or this
Article 7, any item of deduction, loss or Code Section 705(a)(2)(B) expenditure
that is attributable to "partner non-recourse debt" shall be allocated in
accordance with the manner in which the Shareholders bear the economic risk of
loss for such debt (determined in accordance with Regulation Section
1.704-2(i)).

         (d) To the extent that any item of income, gain, loss or deduction has
been specially allocated pursuant to paragraph (a), (b) or (c) of this Section
7.4 ("Required Allocations") and such allocation is inconsistent with how the
same amount otherwise would have been allocated under Sections 4.1 and 4.2,
subsequent allocations under Sections 4.1and 4.2 shall be made, to the extent
possible, in a manner consistent with paragraphs (a), (b) and (c) of this
Section 7.4 which negates as rapidly as possible the effect of all previous
Required Allocations.

         (e) Solely for federal, state and local income and franchise tax
purposes and not for book or Capital Account purposes, income, gain, loss and
deduction with respect to property carried on the Fund's books at a value other
than its tax basis shall be allocated (i) in the case of property contributed in
kind, in accordance with the requirements of Code Section 704(c) and such
Regulations as may be promulgated thereunder from time to time, and (ii) in the
case of other property, in accordance with the principles of Code Section 704(c)
and the Regulations thereunder, in each case, as incorporated among the
requirements of the relevant provisions of the Regulations under Code Section
704(b).

                    ARTICLE 8: DISTRIBUTIONS TO SHAREHOLDERS

         8.1 Distributions of Available Cash from Operations. Subject to the
terms of this Agreement, including Section 9.7, the Fund shall make
distributions to Shareholders of Available Cash from Operations with respect to
each Fiscal Year in the manner and at the time determined by the Manager. The
amount of Available Cash From Operations determined to be available, if any,
other than amounts determined by the Manager to be distributable as an Early
Investment Incentive pursuant to Section 9.7, will be distributed 15% to the
Manager and 85% to the Investors.

                                       17


         8.2 Distribution of Available Cash from Capital Transactions. Subject
to the terms of this Agreement, including Section 9.7, the Fund shall make
distributions to Shareholders of Available Cash from Capital Transactions with
respect to each Fiscal Year, in the manner and at the times determined by the
Manager, as follows:

         (i) Before Investors have received total distributions (including
         distributions from Available Cash From Operations but excluding
         distributions attributable to the Early Investment Incentive and
         distributions of Available Cash from Temporary Investments) equal to
         their Capital Contributions, 99% of Available Cash From Capital
         Transactions will be distributed to Investors and 1% to the Manager.

         (ii) After Investors have received total distributions (including
         distributions from Available Cash From Operations but excluding
         distributions attributable to the Early Investment Incentive and
         distributions of Available Cash from Temporary Investments) equal to
         their Capital Contributions, 85% of Available Cash From Capital
         transactions will be distributed to Investors and 15% to the Manager.

         8.3 Interim Distributions Based on Estimates. To the extent that the
Fund makes interim distributions prior to the end of any Fiscal Year, such
distributions are provisional and may be made based upon estimates of the
Manager of the results of operations of the Fund for the balance of the Fiscal
Year, subject to a true-up at the end of such Fiscal Year. To the extent that
the Fund subsequently determines that any amounts were improperly distributed,
and not repaid to the Fund by any Shareholder, the Fund may take such action as
the Manager shall determine to recover such amounts, including, without
limitation, to offset any amounts of future distributions to such Shareholder to
satisfy such repayment obligation.

         8.4 Distribution in Kind. If the Fund elects to make a distribution in
kind of any of the assets of the Fund, it shall give notice of its election to
each Shareholder, specifying the nature and value of all such assets to be
distributed in kind, the deadline for giving notice of refusal to accept a
distribution in kind and to the extent advisable, the estimated time necessary
for the Fund to liquidate assets if those assets are not distributed and other
information as required. In making such election, the Fund shall not arbitrarily
value assets to be distributed in kind nor shall it specify assets to be
distributed in kind in such a manner as to unreasonably advantage or
disadvantage any Shareholder. A Shareholder may refuse to accept a distribution
in kind by giving written notice to the Fund not later than 30 days after the
effective date of the Fund's notice of distribution. If a Shareholder refuses a
distribution in kind, the Fund shall retain in the Fund's name the portion of
the assets which were to be distributed in kind and which were to be allocated
to the refusing Shareholder (the "Retained Assets") and shall liquidate

                                       18



the Retained Assets in accordance with this Agreement. Upon liquidation of the
Retained Assets, the sum realized shall be distributed to the Shareholder
refusing distribution in kind in full discharge of the Fund's obligation to
distribute the Retained Assets. In determining the Capital Accounts of the
Shareholders, a distribution of assets in kind shall be considered a sale of the
property distributed so that any unrealized gain or loss with respect to such
property shall be deemed to have been realized and allocated among the
Shareholders in accordance with Article 4.

         8.5 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment or
distribution to the Fund or the Shareholders shall be treated as amounts
distributed to the Shareholders pursuant to this Article 8 for all purposes
under this Agreement. The Fund may allocate any such amounts among the
Shareholders in any manner that is in accordance with applicable law.

         8.6 Limitations. Distributions to Shareholders shall not be made to the
extent they are prohibited by restrictions contained in the Delaware Act or
other provisions of this Agreement. Further, distribution shall not be made to
any Investor to the extent that the effect of such distributions would cause the
balance of such Investor's Capital Account to be below zero unless such Investor
undertakes an affirmative obligation to make a cash contribution to the Fund in
the amount of any negative balance in such Investor's Capital Account and posts
security satisfactory to the Manager to satisfy such restoration obligation.

         8.7 Distribution of Available Cash from Temporary Investments. Subject
to the terms of this Agreement, the Fund shall make distributions to
Shareholders of Available Cash from Temporary Investments with respect to each
Fiscal Year, in the manner and at the times determined by the Manager as
follows: 99% to the Investors, pro rata, and 1% to the Manager.

                          ARTICLE 9: OPERATION OF FUND

         9.1 Investment Fee. The Fund shall pay Ridgewood out of Fund Property
an investment fee in an amount equal to 4.5% of the base amount of each Capital
Contribution per Investor Share. The base amounts are computed at the rate of
$150,000 of Capital Contributions per Investor Share, without considering any
discounts or waivers of fees. The investment fee payable in respect of Investors
whose subscriptions for Shares are accepted by the Fund in 2006 is for the
Manager's services provided in that year and the fee payable by Investors whose
subscriptions for Shares are accepted by the Fund in a later year is for those
services for capital contributed in that year. The fee in respect of services
performed by the Manager during any year in which additional funds are received
by the Fund under Section 9.6 shall be payable in accordance with the terms and
conditions of any such offering pursuant to Section 9.6.

                                       19


         9.2 Placement Agent and other Selling Commissions. (a) The Fund shall
pay out of Fund Property to Ridgewood Securities Corporation or to any
broker-dealer who effects the sale of one or more whole or fractional Shares,
cash selling commissions in an aggregate amount equal to 8% of the base amount
of each Capital Contribution. The base amounts are computed at the rate of
$150,000 of Capital Contributions per Investor Share, without considering any
discounts or waivers of fees. For serving as Placement Agent, Ridgewood
Securities Corporation shall in addition be entitled to receive out of Fund
Property a fee in an amount equal to 1% of each Capital Contribution. Such
commissions payable on each Capital Contribution in respect of sales of Shares
prior to the Termination Date and shall be due and payable promptly after the
latest to occur of (i) acceptance by the Fund of an Investor's subscription,
(ii) the Escrow Date, or (iii) the receipt by the Fund of the Investor's Capital
Contribution. Except as set forth in this Section 9.2(a), the Placement Agent is
not entitled to any other fee or reimbursement from the Fund.

         (b) Ridgewood may pay additional compensation to registered
broker-dealers assisting in the sale of Investor Shares out of its own funds,
including a portion of the cash otherwise distributable to the Manager hereunder
or the fees payable to it by the Fund. In addition, Ridgewood, in its sole
discretion, may waive or pay over to certain Investors a portion of
distributions or fees from the Fund otherwise payable to it.

         9.3 Other Expenses.

         (a) Subject to Sections 9.3(b) and (c), the Fund shall reimburse
Ridgewood for all actual and necessary direct expenses paid or incurred in
connection with the operation of the Fund, including but not limited to travel
expenses and third party accounting, legal and consulting fees, to the extent
that those expenses were incurred by Ridgewood in carrying out responsibilities
assigned to it by this Agreement and were consistent with such Agreement.

         (b) The Fund shall pay the Manager out of Fund Property an
organizational, distribution and offering fee in an amount equal to 3.5% of the
base amount of each Capital Contribution. The base amounts are computed at the
rate of $150,000 of Capital Contributions per Investor Share, without
considering any discounts or waivers of fees. The organizational, distribution
and offering fee is intended to cover all expenses incurred in the offer and
sale of Shares, including legal, accounting, and consulting fees, printing,
filing, postage and other expenses of organizing the Fund, distribution and
selling costs and closing costs for the offering. The fee shall be payable on
the Escrow Date as to Shares purchased through that date and on each date
thereafter on which the Fund receives and collects full payment for additional
accepted subscriptions for Shares. If these expenses exceed 3.5% of the
aggregate Capital Contributions, the Manager shall pay such excess.

                                       20


         (c) The Fund shall reimburse Ridgewood for direct expenses actually
incurred for operational or project development services provided by Ridgewood
to the extent (i) the charges for the services do not exceed amounts that would
be charged by unrelated firms offering similar services and (ii) the Projects do
not reimburse the Manager for those expenses.

         (d) In respect of the acquisition or disposition of all or a portion of
the Fund Property, the Fund may be required to or may find it advantageous to
and is authorized to, engage a broker or similar adviser and to pay a brokerage
fee to the broker or other persons responsible for bringing the acquisition or
disposition opportunity to the Fund's attention or for investigating, evaluating
or negotiating the acquisition or disposition of the Fund's interest therein.

         9.4 Management Fee. For each 12-month period beginning on the date the
offering of Investor Shares is commenced, and ending upon the winding up of the
Fund's business, the Fund shall pay the Manager from Fund Property a Management
Fee, payable in advance in equal monthly installments, at the annual rate of
2.5% of the aggregate of Capital Contributions.

         (a) The Management Fee will be payable by the Fund in equal monthly
installments in advance beginning on the date the offering commences, and is
payable from Fund cash flow, if any, or from other Fund assets, including
without limitation, contributed capital and interest earned on interim
investments.

         (b) The Management Fee shall be in lieu of any reimbursement to the
Manager for administrative and overhead expenses, including without limitation
postage, communication, computer service, accounting, regulatory reporting and
compensation costs of the Manager allocable to the Fund.

         (c) The Management Fee does not defray fees, expenses and payments such
as legal, outside accounting and consulting expenses, including amounts paid by
the Fund to persons other than Ridgewood or any Affiliate of Ridgewood, the Fund
or Robert E. Swanson for performing due diligence or identifying investment
opportunities for the Fund. The Management Fee also does not defray
extraordinary expenses incurred by Ridgewood or any expenses described in
Section 9.3(a). Amounts not defrayed by the Management Fee shall be borne by the
Fund or Ridgewood under Section 9.3.

         9.5 Payment and Recoupment of Fees. As soon as funds have been released
to the Fund from the escrow account referred to in Section 1.6 (c), they may be
used to pay the fees referred to in Sections 9.1, 9.2, 9.3and 9.4 then due. If
the Manager withdraws the offering of Shares, or rejects any subscription for
Shares, any person that has received payments from the proceeds of the offering
shall return such payments to the Fund upon demand by the Manager.

                                       21


         9.6 Salvage Fund. The Fund will (and may be required by the operator of
any Natural Gas Project to) reserve and set aside each month in a separate
interest-bearing account ("Salvage Fund") a portion of the Fund's net revenue,
if any, that the Fund may receive form the production and sale of natural gas
from each Natural Gas Project in which the Fund has invested until such time as
the Salvage Fund contains an amount equal to the Fund's anticipated salvage
value of dismantling production platforms, plugging and abandoning the platform
wells, and removing the platforms and platform wells in respect of each such
Natural Gas Project after its useful life, in accordance with applicable federal
and state law and regulations. Any portion of the Salvage Fund that remains
after the Fund pays its share of the salvage costs will be distributed to the
Investors in accordance with the provisions of Section 8.1.

         9.7 Early Investment Incentive. The Fund is offering to such Early
Investors an Early Investment Incentive upon the following terms and conditions:

         (a) For Investors who subscribe to the Fund between February 1, 2006
and February 28, 2006 and have fully paid their Capital Contribution shall be
entitled to receive an Early Investment Incentive equal to $12,000 per $150,000
Share.

         (b) For Investors who subscribe to the Fund between March 1, 2006 and
March 31, 2006 and have fully paid their Capital Contribution shall be entitled
to receive an Early Investment Incentive equal to $8,000 per $150,000 Share.

         (c) Investors who subscribe to the Fund on or after April 1, 2006 shall
not be entitled to, nor shall they receive, an Early Investment Incentive.

         (d) The Manager anticipates that the Early Investment Incentive, as
described herein, shall be paid either monthly or quarterly and begin when the
Manager determines that the Fund has sufficient cash flow. The Manager will
continue such payments, as described herein until the Early Investment Incentive
to Investors entitled to such Early Investment Incentive has been paid in full.
Thereafter, all Investors share in distributions of the Fund in accordance with
their individual ownership percentage.

         (e) Other than any right to receive an Early Investment Incentive, all
other rights, privileges and obligations of Investors of the Fund shall remain
as described herein. Except for an Early Investment Incentive, as described
herein, all Investors have equal rights as described in this Memorandum and set
forth in the LLC Agreement.

         9.8 Supplemental Offering of Class or Series Shares. The Fund from time
to time may create and sell additional Investor Shares or additional classes or
series of Shares if the Manager in its sole discretion determines that the best

                                       22


interests of the Fund so require. The Manager is authorized to determine or
alter any or all of the powers, rights, qualifications, limitations or
restrictions granted or imposed upon any such series or supplemental Shares or
the offering thereof, and to fix, alter or reduce the number of Shares
comprising any such class or series, and to provide for the rights and terms of
redemption or conversion of the Shares of any such class or series. Any such
Shares may be offered to such persons and on such terms and conditions as the
Fund may determine.

         (a) Establishment and Designation of Class or Series. Notwithstanding
any other limitations on the authority of the Manager set forth elsewhere in
this Agreement, the manager, at any time and from time to time, may authorize
the division of members and interests held hereunder into two or more series
(hereinafter "Series") and the division of any existing or new Series into two
or more classes (hereinafter "Classes"). Any such authorization shall (a)
establish and designate, and fix and determine the relative rights, powers,
privileges, preferences and duties of the Series or Class (including, without
limitation, voting rights, if any, distribution rights, transfer restrictions,
conversion rights and redemption rights) so authorized; (b) set forth the
purposes, powers, policies, restrictions and limitations of the Series so
authorized; (c) be effective as of the date specified therein; and (d) be
incorporated herein by reference.

         (b) Assets and Liabilities Associated with Class or Series. The Manager
shall cause the Company to maintain separate and distinct records for each
Series and shall cause the assets, debts, liabilities, obligations, expenses,
profits and losses associated with any such Series to be held and accounted for
separately from the other assets, debts, liabilities, obligations, expenses,
profits and losses of the Company or any other Series.

         (1) All consideration received by the Company for the issue or sale of
Interests of a particular Series together with all Company Assets in which such
consideration is invested or reinvested, all income, earnings, profits and
proceeds thereof, including any Capital Proceeds received by the Company from a
Capital Transaction involving such assets, shall irrevocably belong to that
Series for all purposes, subject only to the rights of creditors of such Series
and except as may otherwise be required by applicable tax laws. In the event
that there are any Company Assets, or any income, earnings, profits, and
proceeds thereof, funds or payments which are not readily identifiable as
belonging to any particular Series, the manager shall allocate them among any
one or more Series in such manner and on such basis as the Manager, in its sole
discretion, deems fair and equitable. Each such allocation by the Manager shall
be conclusive and binding upon the Members and Interest Holders of all Series
and Classes for all purposes.

         (2) All liabilities, expenses, costs, charges, and reserves of the
Company which are readily associated with a particular Series shall be charged
against the assets associated with that Series, and any liabilities, expenses,
costs, charges and reserves of the Company that are not readily associated with

                                       23


a particular Series shall be allocated and charged by the Manager to, between or
among any of or more of the Series, in such manner and on such basis as the
Manager, in its sole discretion, deems fair and equitable. Each such allocation
by the Manager shall be conclusive and binding upon the Members and Interest
Holders of all Series and Classes for all purposes.

         (3) The debts, liabilities, obligations and expense incurred by,
contracted for or otherwise existing with respect to a particular Series shall
be enforceable against the assets associated with that Series only, and not
against the assets associated with any other Series (or against the assets of
the Company generally). The Manager shall cause notice of this limitation on
inter-series liabilities to be set forth in the Certificate of Formation of the
Company (whether originally or by amendment) to be filed in the Office of the
Delaware Secretary of State pursuant to the Act. All Persons who extend credit
to (or with respect to) a particular Series, or who contract with (or with
respect to) or have a claim against a particular Series, may look only to the
assets associated with that Series for repayment of such credit of to enforce or
satisfy any such contract or claim.

         9.8 (c) Rights of Members. Unless otherwise provided in the
authorization creating the Series and except as set forth in this Section 9.8,
the rights, powers, privileges, limitations, and restrictions, including voting
rights, of the Members of a particular Series shall be as otherwise set forth in
this Agreement.

                             ARTICLE 10: ACCOUNTING

         10.1 Elections. The Fund shall elect the calendar year as its Fiscal
Year. The Fund shall adopt the accrual method of accounting or such other method
of accounting as the Fund shall determine. The Fund shall elect to be taxed only
as a partnership unless this provision is amended with the consent of Investors
whose aggregate Capital Contributions constitute more than 50% of all Capital
Contributions to the Fund. The Fund may but shall not be required to make an
election under Section 754 of the Code or corresponding state taxation laws. The
Manager is empowered to make any other election permitted by law, including
without limitation an election under Code Section 771, without prior notice to
or consent by any other Shareholder.

         10.2 Books and Records. The Fund's books and records shall be kept at
the principal place of business of the Fund and shall be maintained in
accordance with generally accepted accounting principles, consistently applied.
The Fund shall maintain supplemental records on the basis utilized in preparing
the Fund's federal income tax return with such adjustments in accounting as are
required by this Agreement or as the Fund determines would be in the best
interests of the Fund.

         10.3 Reports. The Fund will keep each Shareholder and assignee
complying with Article 13 currently advised as to activities of the Fund by
communications furnished at least quarterly. An independent certified public

                                       24


accounting firm selected by the Fund will prepare the Fund's federal income tax
return as soon as practicable after the conclusion of each year and each
Shareholder will be furnished, at that time, with the necessary accounting
information for each Shareholder to take into account and report separately such
Shareholder's distributive share of the income and deductions of the Fund. The
Fund will use its reasonable best efforts to obtain the information necessary
for the accounting firm as soon as practicable and to transmit the resulting
accounting and tax information to the Shareholders as soon as possible after
receipt from the accounting firm.

         10.4 Bank Accounts. The Fund shall maintain separate segregated
accounts in its name at one or more commercial banks, and the cash of the Fund
shall be kept in any of those accounts as determined by the Fund.

         10.5 Interim Assets. To the extent the Fund's liquid capital is not
otherwise committed to transactions or required for other purposes, the Fund may
invest such liquid capital in any manner it deems prudent, including, but not
limited to, the following:

             (a) Obligations of banks or savings and loan associations that are
insured in their entirety by agencies of the United States government;

             (b) Obligations of or guaranteed by the United States government or
its agencies; and

             (c) Money market or other short-term obligations or financial
instruments (having a maturity of one year or less).

                 ARTICLE 11: RIGHTS AND OBLIGATIONS OF INVESTORS

     11.1 Participation in Management. No Shareholder (other than the Manager
acting in its capacity as such) shall have the right, power, authority or
responsibility to participate in the ordinary and routine management of the
Fund's affairs or to bind the Fund in any manner.

     11.2 Rights to Engage in Other Ventures. No Investor or any officer,
director, shareholder or other person holding a legal or beneficial interest in
any Investor shall, by virtue of his ownership of a direct or indirect interest
in the Fund, be in any way prohibited from or restricted in engaging in, or
possessing an interest in, any other business venture of a like or similar
nature including any other natural gas fund, project or property.

     11.3 Limitations on Transferability. The interest of an Investor shall not
be transferable except under the conditions set forth in Article 13 hereof.

     11.4 Information. (a) In addition to information to be provided under
Section 10.3, the Fund will provide each Investor with information as specified

                                       25


in this Section 11.4. No Investor has any rights to information from the Fund
except as provided in this Section 11.4 and Section 10.3.

     (b) No Investor or other person acting in the right of or for the benefit
of an Investor is entitled to receive from the Fund or its Manager any
information concerning any other Investor or offeree of the Fund's securities,
without the prior written consent of the other Investor or offeree.

     (c) The Fund may withhold, redact or summarize other types of information
so as to prevent Investor information from being disclosed in violation of
Section 11.4(b).

     (d) Each Investor is entitled to obtain the following information from the
Fund upon reasonable written demand stating the purpose of the demand (which
purpose must be reasonably related to the Investor's interest in the Fund):

     (i) True and full information regarding the Fund's business and financial
condition and the contributions to the Fund, as such information is reasonably
related to the Investor's stated purpose;

     (ii) Promptly after becoming available, a copy of the Fund's federal, state
and local income tax returns or information returns for the preceding year and
prior years to the extent reasonably available, provided however, that
information that would otherwise not be available to an Investor hereunder shall
not become available by reason of it being appended or attached to or part of
such tax returns;

     (iii) A copy of the Certificate and this Agreement and all amendments
thereto; and

     (iv) Copies of material agreements between the Fund and Ridgewood Energy
Corporation or other Ridgewood Programs, if such agreements, or provisions
thereof, are reasonably related to the Investor's stated purpose.

     (e) Investors are not entitled to agreements, technical information, trade
secrets and other confidential information relating to the Fund's development of
the Projects, or to the acquisition or transaction documents related thereto,
unless the Manager, in its sole discretion, determines that disclosure will not
harm the Fund or the Projects.

     (f) Notwithstanding Section 11.4(d), the Fund may keep confidential from
Investors for such period of time as it deems reasonable any other information
that it reasonably believes to be in the nature of trade secrets or other
information that the Fund in good faith believes would not be in the best
interests of the Fund to disclose or that could damage the Fund or its business
or that the Fund is required by law or by agreement with a third party to keep
confidential.

     (g) The Fund may establish reasonable standards governing, without
limitation, the information and documents to be furnished and the time and the

                                       26


location, if appropriate, of furnishing that information and documents. Costs of
providing information and documents shall be borne by the requesting Investor
except for de minimis amounts consistent with the Fund's ordinary practices. The
Fund shall be entitled to reimbursement for its direct, out-of-pocket expenses
incurred in declining unreasonable requests (in whole or in part) for
information.

     (h) Providing information to one Investor or to persons outside the Fund
does not act as a waiver of the Fund's rights to withhold information to another
Investor.

     (i) The Fund may keep its records in other than written form if capable of
conversion into written form within a reasonable time.

                                   ARTICLE 12:
                    POWERS, DUTIES AND LIMITATIONS OF MANAGER

     12.1 Management of the Fund. The Manager shall have full, exclusive and
complete discretion in the management and control of the Fund. The Manager
agrees to manage and control the affairs of the Fund to the best of its ability
and to conduct the operations contemplated under this Agreement in a careful and
prudent manner and in accordance with good industry practice. The Manager may
bind the Fund.

     12.2 Acceptance of Subscriptions. The Manager shall not cause the Fund to
accept any subscription for Shares except as provided in Article 1 or in Section
9.6, as the case may be.

     12.3 Specific Limitations. (a) The Manager shall not take any of the
following actions without the affirmative vote or written consent of Investors
pursuant to the procedures set forth in Sections 15.1 and 15.2 of this
Agreement:

     (1) Any act that would make it impossible to carry on the Fund's ordinary
business;

     (2) Causing the dissolution or termination of the Fund prior to the
expiration of its term, except as provided under Article 14;

     (3) Possessing Fund Property or assigning rights in specific Fund Property
for other than a Fund purpose; or

     (4) Constituting any other person as a Manager, except as provided in
Article 14.

     (b) The Manager shall not take any action that would cause the Fund to be
regulated as an "investment company" under the 1940 Act, nor will the Manager
take any action that would cause the Fund to change its investment objectives
and policies without the approval of Investors whose aggregate Capital
Contributions constitute more than 50% of all Capital Contributions to the Fund
at such time.

                                       27


     (c) The Manager shall not sell, exchange, lease, mortgage, pledge or
transfer all or a substantially all of the Fund's assets if not in the ordinary
course of operation of Fund Property without the approval Investors whose
aggregate Capital Contributions constitute more than 50% of all Capital
Contributions to the Fund at such time.

     12.4 Specific Powers. In addition to the powers and duties otherwise
provided for in this Agreement, the Manager has the following powers and duties:

     (a) To direct or supervise the Fund and the Fund's agents in the exercise
of any action relating to the Fund's affairs, including without limitation the
powers described in Section 1.8;

     (b) To take the actions specified in Section 12.3 or elsewhere in this
Agreement if the approvals specified therein are obtained;

     (c) To amend this Agreement as specified in Section 15.8 or other
provisions of this Agreement;

     (d) To lend money to the Fund to do so (without being obligated to do so)
if such loan bears interest at a reasonable rate not exceeding the interest cost
to the Manager or the amount that would be charged to the Fund by an unrelated
lender on a comparable loan for the same purpose. The Manager may not receive
points or other financing charges or fees regardless of the amount loaned to the
Fund. Before the Manager makes any loans to the Fund, the Manager will attempt
to obtain a loan from an unrelated lender secured, if at all, only by Fund
Property;

     (e) To approve in its sole discretion any transfer of Investor Shares;

     (f) To terminate the offering of Shares at any time prior to the
Termination Date;

     (g) To withdraw the offering of Shares at any time as provided for in this
Agreement;

     (h) To acquire such assets or properties, real or personal, as the Manager
in its sole discretion deems necessary or appropriate for the conduct of the
Fund's business and to sell, exchange, hedge or distribute to Shareholders in
kind or otherwise dispose of any part of the Fund Property;

     (i) To operate any Natural Gas Project or other Fund Property acquired by
the Fund, or to contract for operation under Section 12.5, or to engage
non-Affiliates to operate any Project or other Fund Property on such terms as
they may determine in their sole discretion;

                                       28


     (j) To waive any fees or compensation payable to it and to credit such
waived amount in its discretion against any obligations it may have to
contribute capital under Section 14.6;

     (k) To provide, or arrange for the provision of, managerial assistance to
the Projects in which the Fund invests;

     (1) To retain and own Working Interests in natural gas wells that are in
the same lease block as, but are not part of, Fund Property; and

     (m) To establish valuation principles and to periodically apply such
principles to the Fund's investment portfolio.

     12.5 Operation by an Affiliate. The Fund, by action of the Manager, may
engage an Affiliate of the Manager to provide development, construction,
operating, management, purchasing, planning and administrative services for any
or all Projects operated by the Fund. Any such Affiliate may be paid for its
services, provided that the cost of such services to the Fund is generally
within the range of costs the Fund would have been charged by an unrelated
third-party. Such Affiliate of the Manager under this Section 12.5 shall act
under the supervision and direction of the Manager and does not have the
authority to bind the Fund or act directly in its name except as authorized by
the Manager or an officer of the Fund. The Manager under this Section 12.5 shall
be reimbursed for all costs incurred by it as provided in Section 9.3 (c) but
shall not receive any compensation in excess of its costs. The Fund may enter
into an operating agreement or other agreements to implement this Section 12.5.
The Manager shall not be compensated or reimbursed under this Section 12.5 for
any services related to the administration of the Fund as a whole, to relations
with Investors or the offering of Shares or to the identification, acquisition
or disposition of Projects.

     12.6 Officers of Fund. (a) The Manager shall appoint a President, one or
more Vice Presidents, a Secretary and such other officers and agents of the Fund
as the Manager may from time to time consider appropriate, none of who need be a
Shareholder. Each officer shall have the powers and duties usually appertaining
to a similar officer of any similar limited liability company or alternative
entity under the direction of the Manager and shall hold office at the pleasure
of the Manager. Unless otherwise specified by the Manager, the President of the
Fund shall be its chief executive officer. The same person may hold any two or
more offices. Any officer may resign by delivering a written resignation to the
Manager and such resignation shall take effect upon delivery or as otherwise
specified therein.

     (b) All conveyances of real property or any interest therein by the Fund
may be made by the Manager, which shall execute on behalf of the Fund any

                                       29


instruments necessary to effect the conveyance. A certificate of the Secretary
of the Fund stating compliance with this Section 12.6(b) shall be conclusive in
favor of any person relying thereon.

     (c) All other documents, agreements, instruments and certificates that are
to be made, executed or endorsed on behalf of the Fund shall be made, executed
or endorsed by such officers of the Fund, the Manager or persons as the Manager
shall from time to time authorize and such authority may be general or confined
to specific instances. In the absence of other provisions, the President is
authorized to execute any document, to take any action on behalf of the Fund and
to authorize other officers to execute confirmatory documents or certificates.

     12.7 Presumption of Power. The execution by the Manager or the Fund's
officers of leases, assignments, conveyances, contracts or agreements of any
kind whatsoever shall be sufficient to bind the Fund. No person dealing with the
Manager or the Fund's officers shall be required to determine their authority to
make or execute any undertaking on behalf of the Fund, nor to determine any fact
or circumstances bearing upon the existence of their authority nor to see the
application or distribution of revenues or proceeds derived therefrom, unless
and until such person has received written notice to the contrary.

     12.8 Obligations Not Exclusive. The Manager and the officers of the Fund
shall be required to devote only such part of their time as is reasonably needed
to manage the business of the Fund or discharge their duties, it being
understood that Ridgewood, as Manager, and the officers of the Fund have and
shall have other business interests and therefore shall not be required to
devote their time exclusively to the Fund. Ridgewood Energy Corporation and the
officers of the Fund shall in no way be prohibited from or restricted in
engaging in, or possessing an interest in, any other business venture of a like
or similar nature. Nothing in this Section 12.8 shall relieve Ridgewood Energy
Corporation of its or their fiduciary or contractual obligations to the
Investors, except as limited in Article 3. Notwithstanding anything to the
contrary contained in this Article or elsewhere in this Agreement, Ridgewood
Energy Corporation has no duty to take any affirmative action with respect to
management of the Fund's business or Fund Property which might require the
expenditure of monies by the Fund or Ridgewood Energy Corporation unless the
Fund is then possessed of such monies available for the proposed expenditure.
Except as otherwise provided in this Agreement, under no circumstances shall
Ridgewood Energy Corporation be required to expend its own funds in connection
with the day to day operation of Fund business.

     12.9 Removal or Incapacity of a Manager. (a) Investors whose aggregate
Capital Contributions constitute at least 25% of all Capital Contributions to
the Fund at such time may propose the removal of the Manager, either by calling
a meeting or soliciting consents in accordance with the terms of this Agreement.
On the affirmative vote of Investors whose aggregate Capital Contributions

                                       30


constitute more than 50% of all Capital Contributions to the Fund at such time
the Manager shall be removed effective as of the date the vote is completed.

     (b) If Ridgewood is removed as Manager or is incapable of acting as Manager
as enumerated in Section 14.1(c), or it resigns for cause, it may elect in its
sole discretion to take and to cause the Fund to take one of the following
courses of action:

     (1) The former Manager may elect to exchange its Management Share for a
series of cash payments from the Fund to the former Manager in amounts equal to
the amounts of distributions to which the former Manager would otherwise have
been entitled under this Agreement in respect of investments made by the Fund
prior to the date of the removal or other incapacity. Such payments shall be
payable out of the Fund's available cash before any distributions are made to
the Investors pursuant to this Agreement. For purposes of this Section 12.9
(b)(1), from and after the date of any such removal or other incapacity: (i) the
former Manager's interest in the Fund attributable to its Management Share shall
be terminated and its Capital Account shall be reduced by the amount which is
attributable to its Management Share and (ii) the former Manager shall continue
to receive its pro rata share of all allocations to Investors provided in this
Agreement that are attributable to Investor Shares acquired by the Manager.

     (2) In the alternative, the former Manager may engage a qualified
independent appraiser and cause the Fund to engage a separate qualified
independent appraiser (at the Fund's expense in each case), who together shall
value the Fund Property as of the date of such removal or other incapacity as if
the Fund Property had been sold at its fair market value so as to include all
unrecognized gains or losses. If the two appraisers cannot agree on a value,
they shall appoint a third independent appraiser (whose cost shall be borne by
the Fund) whose determination, made on the same basis, shall be final and
binding. Based on the appraisal, the Fund shall make allocations to the former
Manager's Capital Account of Net Profits, Net losses and other items as of the
date of such removal or other incapacity as if the Fund's Fiscal Year had ended,
solely for the purpose of determining the former Manager's Capital Account. If
the former Manager has a positive Capital Account after such allocation, the
Fund shall deliver a promissory note of the Fund to the former Manager, with a
principal amount equal to the balance in that Capital Account and which shall
bear interest at a rate per annum equal to the prime rate in effect at Chase
Manhattan Bank, N.A. on the date of removal or other incapacity, with interest
payable annually and principal payable annually only to the extent of 25% of any
available cash before any distributions thereof are made to the Investors under
this Agreement. If the Capital Account of the former Manager has a negative
balance after such allocation, the former Manager shall contribute to the
capital of the Fund, in its discretion, either cash in an amount equal to the
negative balance in its Capital Account or a promissory note to the Fund in such

                                       31



principal amount maturing five years after the date of such removal or other
incapacity, bearing interest payable annually at the rate specified above. For
purposes of this Section 12.9(b)(2), from and after the date of any such removal
or other incapacity, the former Manager's Management Share in the Fund shall be
terminated and the former Manager shall no longer have any interest in the Fund
other than the right to receive the promissory note and payments thereunder as
provided above.

     (c) In the event that the Manager is removed or no longer serves as a
Manager due to an incapacity enumerated in Section 14.1(c), the former Manager
shall not be entitled to any uncollected fees specified in Article 9 to the
extent not accrued before the date of such removal or other incapacity.

     (d) Notwithstanding anything else contrary contained herein, removal of the
Manager shall only be effective upon the selection and engagement of a new
manager, pursuant to the terms set forth herein

     12.10 Indemnification of Placement Agent. (a) The Placement Agent shall not
have any duty, responsibility or obligation to the Fund or any Shareholder as a
consequence of its right to receive any selling commissions or placement agent
fees from the Fund in connection with any offering of Shares, except to the
extent provided under applicable Federal and State law. The Placement Agent has
not assumed, and will not assume, any responsibility with respect to the Fund
nor will it be permitted by the Fund to assume any duties, responsibilities or
obligations regarding the management, operations or any of the business affairs
of the Fund, subsequent to any offering of Shares.

     (b) The Placement Agent shall be indemnified and held harmless by the Fund
against any losses, damages, liabilities or costs (including reasonable
attorneys' fees) arising from any threatened, pending or completed action, suit,
claim or proceeding by any Shareholder against the Placement Agent (except as
may be limited by the Act or applicable state statutes), based upon the
assertion that the Placement Agent has any continuing duty or obligation,
subsequent to any offering of Shares, to the Fund or any Shareholder or
otherwise to monitor Fund operations or report to Investors concerning Fund
operations.

     12.11 Potential Conflicts of Interest. (a) There are potential conflicts of
interest involved in the operation of the Fund, including but not limited to:

     (i) competing demands for management resources of Ridgewood and other
Affiliates;

     (ii) conflicts between the interests of Ridgewood and its Affiliates in
receiving compensation from the Fund for investment activities, operating
activities, and divestitures, as well as reimbursement for expenses, and the
interests of the Investors;

                                       32


     (iii) conflicts relating to the allocation of costs and expenses among
Ridgewood's other investment programs;

     (iv) conflicts arising from the fact that Ridgewood will not make a capital
contribution in respect of its interest as such in the Fund and that the
Investors will supply all of the capital of the Fund;

     (v) conflicts caused by the fact that Ridgewood shares in gains realized
from the Projects but does not share in losses realized on such projects;

     (vi) conflicts caused by the fact that Ridgewood has broad discretion to
determine distributions, allocations of profit and loss and other items and that
the entitlements of Ridgewood to fees, distributions and other items can be
increased or decreased as a result of the use of that discretion;

     (vii) conflicts caused by the fact that Ridgewood may make subjective
determinations of the value of the Fund's assets, and any such determination
affects the performance record of the Fund;

     (viii) conflicts between the interests of the Fund and of other programs
when Ridgewood allocates favorable or unfavorable investment opportunities among
them, and conflicts arising if one program or Fund supplies capital for an
investment and another program or Fund later is allocated a portion of that
investment and returns a proportionate amount of capital to the first;

     (ix) conflicts between the interests of the Fund and other programs
sponsored by Ridgewood and its Affiliates;

     (x) potential interests of Ridgewood or its Affiliates in competing
investment programs;

     (xi) conflicts that may arise because the Fund may effect acquisition and
development activities on its own or together with Affiliates;

     (xii) the lack of independent representation of Investors in structuring
this offering and in determining compensation or with respect to material
transactions between the Fund and other programs sponsored by Ridgewood, which
would require only the approval of Ridgewood for authorization; and

     (xiii) the Fund's Projects may be competing against the projects of other
programs sponsored by Ridgewood and, additionally, officers of Ridgewood and of
the Fund may be directors or advisers to competing projects.

     (b) In determining a course of action or deciding among various
alternatives, the Manager will consider these and other conflicts that may exist
and exercise reasonable business judgment when determining such action or
choosing among various alternatives. The Manager shall not be liable to
Shareholders hereunder regarding such action unless the Manager exercised bad
faith, gross negligence or willful misconduct.

                         ARTICLE 13: TRANSFERS OF SHARES

     13.1 Transfer or Resignation by a Manager. A Manager shall not sell, assign
or otherwise transfer its Management Share or resign without first obtaining the
consent of a Majority of the Voting Shares, except that (i) a Manager may

                                       33


pledge its Management Share for a loan; provided that such pledge does not
reduce the cash flow of the Fund distributable to other Shareholders and (ii) a
Manager may waive or assign compensation or fees payable to it.

     13.2 Transfers by Investors. An Investor may sell, exchange or transfer his
Shares except as restricted by and upon compliance with all applicable laws,
including federal and state securities laws and regulations, and all of the
following provisions of this Section 13.2:

     (a) Shares may not be transferred to any person or entity if, as determined
by the Fund or the Manager, in its discretion, such sale, exchange or transfer
would have adverse regulatory consequences to the Fund or any Fund Property,
including, but not limited to, imposing upon the Fund, as a result of such sale,
exchange or transfer, a legal requirement to register the Fund as a public
company pursuant to the Securities Exchange Act of 1934.

     (b) Within 30 days after written notice of a proposed sale or assignment is
received by the Fund from an Investor, the Fund may request in its sole
discretion an opinion of counsel acceptable to the Fund that the proposed
transfer (i) would not invalidate the exemption afforded by Section 4(2) of the
Act or by Regulation D promulgated under the Act and the exemption afforded by
any applicable state securities laws as to any offering of interests in the Fund
and (ii) complies with the exemption afforded by Section 4(1) of the Act and
qualifies for an exemption from registration under any applicable state
securities laws (including any investor suitability standard applicable to the
transferee or the Fund).

     (c) The written approval of the Manager must be obtained, the granting or
denial of which (or the placing of conditions on which) shall be within its sole
and absolute discretion and may be denied for any reason including, without
limitation, that the admission of the proposed transferee or the transfer may be
harmful to the Fund or its operations.

     (d) The transferor and transferee must deliver a dated notice in writing
signed by each, confirming that (i) the transferee accepts and agrees to comply
with all the terms of this Agreement and (ii) the transfer was made in
compliance with this Agreement and all applicable laws and regulations.

     (e) The transferor, transferee and the Fund must execute all other
certificates, instruments and documents and take all such additional action as
the Fund may deem appropriate.

     (f) The Fund may require as a condition to any transfer that may create a
future interest that an opinion of counsel acceptable to the Fund be delivered
to the Fund confirming that the proposed transfer does not have adverse effects
on the Fund under the rule against perpetuities or similar provisions of law.

                                       34


Transfers shall be effective and recognized upon fulfillment of the requirements
of clauses (a) through (f) above and the transferee shall be an Investor owning
investor Shares with the same rights as appertained to the transferor. Any
purported sale or transfer consummated without first complying with this Section
13.2 shall be void.

     13.3 Assignments by Operation of Law. If any Investor shall die, with or
without leaving a will, or become non compos mentis, bankrupt or insolvent, or
if a corporate, partnership or trust Investor dissolves during the Fund term or
if any other involuntary transfer of an Investor's Shares is made, the legal
representatives, heirs and legatees (and spouse, if the Shares have been
community property of such Investor and his or her spouse), bankruptcy
assignees, successors, assigns and corporate, partnership or trust distributees
or such other involuntary transferees (collectively "Involuntary Transferees")
shall not become transferees but shall have (subject to the other terms and
provisions hereof) such rights as are provided with respect to such persons
under the law; provided, however, that such Involuntary Transferees shall not be
an Investor, as defined herein, unless such Involuntary Transferees become
Investors in accordance with and subject to the provisions of Section 13.2
including, but not limited to the right to of the Fund to deny or place
conditions on any transfer if by granting such transfer it would require the
Fund to register as a public company under the Securities Exchange Act of 1934.

     13.4 Expenses of Transfer. In the sole discretion of the Fund, the person
acquiring Shares pursuant to any of the provisions of this Article 13 may be
required to bear all costs and expenses necessary to effect a transfer of such
Shares including, without limitation, reasonable attorney's fees incurred in
preparing any required amendments to this Agreement and the Certificate to
reflect such transfer or acquisition and the cost of filing such amendments with
the appropriate governmental officials.

     13.5 Survival of Liabilities. No sale or assignment of Shares shall release
the transferor from those liabilities to the Fund, which survive such
assignment, or sale as a matter of law or that are imposed under Section 3.4.

     13.6 No Accounting. No transfer of Shares, whether voluntary, involuntary
or by operation of law, shall entitle the transferor or transferee to demand or
obtain immediate valuation, accounting or payment of the transferred Shares.

              ARTICLE 14: DISSOLUTION, TERMINATION AND LIQUIDATION

     14.1 Dissolution. Unless the provisions of Section 14.2 are elected, the
Fund shall be dissolved and its business shall be wound up upon the decision of

                                       35


the Manager to withdraw the offering of Shares described in the Memorandum in
accordance with Section 12.4(g) or on the earliest to occur of:

     (a) December 31, 2045;

     (b) The sale of all or substantially all of the Fund Property;

     (c) The death, removal, dissolution, resignation, insolvency, bankruptcy or
other legal incapacity of the Manager or any other event which would legally
disqualify the Manager from acting hereunder;

     (d) The decision of all Investors or the Manager and a Majority of
Investors; or

     (e) The occurrence of any other event, which, by law, would require the
Fund to be dissolved.

     14.2 Continuation of the Fund. Upon the occurrence of any event of
dissolution described in Sections 14.1 (a) through (e), inclusive, the Fund
shall be dissolved and wound up unless (i) the Manager and a majority of the
Shareholders within 90 days after the occurrence of any such event of
dissolution elect to continue the Fund or, (ii) if there are no remaining
Manager within 90 days after the occurrence of any such event of dissolution,
then, by an affirmative vote of a majority of the Shareholders, the Fund shall
be continued on the terms and conditions herein contained and such Shareholders
shall designate one or more persons willing to be substituted as a Manager. In
the event there is no remaining Manager and the Shareholders have elected to
continue the Fund, as set forth herein, it shall be continued with the new
Manager or Manager who shall succeed to and assume all of the powers, privileges
and obligations of the previous Manager hereunder except as specified in Section
12.9. In the event of dissolution under this Section 14.2, the former Manager
shall have the rights specified in Section 12.9.

     14.3 Liquidation Procedure. Upon dissolution of the Fund for any reason:

     (a) A reasonable time shall be allowed for the orderly liquidation of the
assets of the Fund and the discharge of liabilities to creditors so as to enable
the Fund to minimize the losses normally attendant to liquidation;

     (b) The Shareholders shall continue to receive Available Cash from
Operations or Available Cash From Capital Transactions, as the case may be,
subject to the other provisions of this Agreement and to the provisions of
subsection (c) hereof, and shall share Net Profits and Net Losses for all tax
and other purposes during the period of liquidation; and

                                       36


     (c) The Manager shall act as liquidating Manager and shall proceed to
liquidate the Fund Properties to the extent that they have not already been
reduced to cash unless the liquidating Manager elects to make distributions in
kind to the extent and in the manner herein provided and such cash, if any, and
property in kind, shall be applied and distributed to the Shareholders to the
extent of, and in proportion to, the positive balances of their Capital Accounts
and then in accordance with Article 8.

     14.4 Liquidating Trustee. (a) If the dissolution of the Fund is caused by
circumstances under which no Manager is available to act as liquidating Manager
or if all liquidating Manager are unable or refuse to act, the Shareholders, by
a majority vote, shall appoint a liquidating trustee who shall proceed to wind
up the business affairs of the Fund. If no liquidating trustee is appointed
within 180 days after the event of dissolution, any Shareholder may petition the
Court of Chancery of Delaware to appoint a liquidating trustee. The liquidating
trustee shall have no liability to the Fund or to any Shareholder for any loss
suffered by the Fund which arises out of any action or inaction of the
liquidating trustee if the liquidating trustee, in good faith, determined that
such course of conduct was in the best interests of the Shareholders and such
course of conduct did not constitute negligence or misconduct of the liquidating
trustee. The liquidating trustee shall be indemnified by the Fund against any
losses, judgments, liabilities, expenses and amounts paid in settlement of any
claims sustained by it in connection with the Fund, provided that the same were
not the result of negligence or misconduct of the liquidating trustee.

     (b) Notwithstanding the above, the liquidating trustee shall not be
indemnified and no expenses shall be advanced on its behalf for any losses,
liabilities or expenses arising from or out of an alleged violation of federal
or state securities laws, unless (1) there has been a successful adjudication on
the merits of each count involving alleged securities law violations as to the
particular indemnitee, or (2) such claims have been dismissed with prejudice on
the merits by a court of competent jurisdiction as to the particular indemnitee,
or (3) a court of competent jurisdiction approves a settlement of the claims
against a particular indemnitee.

     14.5 Death, Insanity, Dissolution or Insolvency of an Investor. The death,
insanity, dissolution, winding up, insolvency, bankruptcy, receivership or other
legal termination of an Investor who is not a Manager shall have no effect on
the life of the Fund and the Fund shall not be dissolved thereby.

     14.6 Manager's Capital Contributions. Upon or prior to the first
distribution in liquidation, the Manager shall contribute to the capital of the
Fund an amount equal to any deficit in the Capital Account of such Manager
calculated just prior to the date of such distribution, to the extent not
previously contributed. The Manager, in its discretion, may comply with this

                                       37


Section 14.6 by waiving all or a portion of a distribution or any other
compensation to which it is entitled under this Agreement.

     14.7 Withdrawal of Offering. Dissolution of the Fund resulting from
withdrawal of the offering of Shares is governed by Section 1.6(c) and Section
12.4(g).

                            ARTICLE 15: MISCELLANEOUS

     15.1 Notices. Notices or instruments of any kind which may be or are
required to be given hereunder by any person to another shall be in writing and
deposited in the United States Mail, certified or registered, postage prepaid,
or delivered overnight and addressed to the respective person at the address
appearing in the records of the Fund. Any Investor may change his address by
giving notice in writing, stating his new address, to the Fund. Any notice shall
be deemed to have been given effective as of 72 hours, excluding Saturdays,
Sundays and holidays, after the depositing of such notice in an official United
States Mail receptacle. Notice to the Fund may be addressed to its principal
office.

     15.2 Meetings of Shareholders. (a) Meetings. The Manager may call meetings
of the Shareholders, the Investors or any subgroup thereof concerning any matter
on which they may vote as provided by this Agreement or by law or to receive and
act upon a report of the Manager on matters pertaining to the Fund's business
and activities. Investors holding 25% or more of the outstanding securities or
Shares entitled to vote on the matter may also call meetings by giving notice to
the Fund demanding a meeting and stating the purposes therefore. After calling a
meeting or within 20 days after receipt of a written request or requests meeting
the requirements of the preceding sentence, the Fund shall mail to all
Shareholders entitled to vote on the matter written notice of the place and
purposes of the meeting, which shall be held on a date not less than 15 days nor
more than 45 days after the Fund mails the notice of meeting to the
Shareholders. Any Shareholder entitled to vote on the matter may appear and vote
or consent at a meeting by proxy, provided that such authority is granted by a
writing signed by the Shareholder and delivered to the Fund at or prior to the
meeting.

     (b) Consents. Any consent required by this Agreement or any vote or action
by the Shareholders or any subgroup thereof may be effected without a meeting by
a consent or consents in writing signed by the persons required to give such
consent, to vote or to take action. The Manager may solicit consents or
Investors holding 25% or more of the outstanding securities or Shares entitled
to vote on the matter may demand a solicitation of consents by giving notice to
the Fund stating the purpose of the consent and including a form of consent. The
Fund shall effect a solicitation of consents by giving those Shareholders who
may vote a notice of solicitation stating the purpose of the consent, a form of
consent and the date on which the consents are to be tabulated, which shall be

                                       38


not less than 15 days nor more than 45 days after the Fund transmits the notice
of solicitation for consents. If Investors holding 25% or more of the
outstanding securities or Shares entitled to vote on the matter demand a
solicitation, the Fund shall transmit the notice of solicitation not later than
20 days after receipt of the demand.

     (c) General. To the extent not inconsistent with this Agreement, Delaware
law governing meetings, proxies and consents for limited liability companies
shall apply as to the procedure, validity and use of meetings, proxies and
consents. Any Shareholder may waive notice of or attendance at any meeting or
notice of any consent, whether before or after any action is taken. The date on
which the Fund transmits the notice of meeting or notice soliciting consents
shall be the record date for determining the right to vote or consent. A list of
the names, addresses and shareholdings of all Shareholders shall be maintained
as part of the Fund's books and records.

     (d) Interested Parties. A Shareholder may vote Shares owned by it on any
question permitted under this Agreement regardless of whether that Shareholder,
Affiliates of that Shareholder or other persons associated with or related to
that Shareholder have a personal interest in the subject matter of the
transaction. Delaware law governing the voting of shares in a corporation shall
determine the legal effect of a vote by a Shareholder having an interest
described in the preceding sentence.

     15.3 Loan to Fund by Shareholder. If any Shareholder shall, in addition to
his Capital Contribution to the Fund, lend any monies to the Fund, the amount of
any such loan shall not increase his Capital Account nor shall it entitle him to
any increase in his share of the distributions of the Fund, but the amount of
any such loan shall be an obligation on the part of the Fund to such Shareholder
and shall be repaid to him on the terms and at the interest rate negotiated at
the time of the loan, and the loan shall be evidenced by a promissory note
executed by the Fund except that no Shareholder shall be personally obligated to
repay the loan, which shall be payable and collectible only out of the assets of
the Fund.

     15.4 Delaware Laws Govern. This Agreement shall be governed and construed
in accordance with the laws of the State of Delaware. Each Party hereto agrees
and consents (i) to be subject to the personal jurisdiction of the courts of the
State of Delaware, (ii) that venue for any litigation between or against any of
the parties hereto may be maintained in New Castle County, Delaware, and (iii)
that service of process may be achieved by mail return receipt requested,
overnight delivery or personal hand delivery.

     15.5 Arbitration.

         (a) Binding Arbitration. (1) Except as set forth in Section 15.5(b) or
under any applicable securities laws, any individual claim or dispute
(collectively "Claims") of every type (whether under statute, in contract,

                                       39


tort or otherwise and whether for money damages, penalties or declaratory or
equitable relief) arising from or related in any way to this Agreement,
including any question regarding its existence, validity or termination, or the
operation and management of the Fund by the Fund or the Manager, or their
employees, officers, directors, agents or assigns, shall be resolved by binding
arbitration governed by the Federal Arbitration Act and conducted in accordance
with rules of the American Arbitration Association, provided however, that if
the Federal Arbitration Act should be held inapplicable for any reason,
including the ruling of a court, then the laws of the State of Delaware shall
apply to such arbitration hearing and proceeding. The number of arbitrators
shall be three (3), with each Party having the right to appoint one arbitrator,
who shall together appoint a third neutral arbitrator, each such arbitrator
having experience in the field of securities law and offerings, including
private securities offerings. Such arbitration hearing and proceedings shall be
conducted in New York, New York.

         (2) The Parties hereby expressly waive any right of appeal to any
court. There will be no written record or transcript of the proceedings
required, unless otherwise requested by the Parties or a Party, who shall bear
the costs thereof. All of the Arbitrators' orders and decisions may be
enforceable in, and judgment upon any award may be rendered in the arbitration
proceeding may be confirmed and entered by, a Delaware court having proper
jurisdiction. The Parties agree that all arbitration proceedings concluded
hereunder and the decision of the Arbitrators shall be kept confidential and not
disclosed to any third party, except for a Party's affiliates, accountants and
lawyers.

         (3) Notwithstanding anything else contrary contained herein, the
Arbitrators shall have no authority or power to award consequential, special,
indirect, treble, exemplary or punitive damages of any type, the Parties hereby
waiving their rights, if any, to recover consequential, special, indirect,
treble, exemplary or punitive damages with respect to this Agreement.

         (b) No Class Action. The Parties expressly agree that no Claim may be
brought or submitted to arbitration or heard by any arbitration panel pursuant
to this Section 15.5 as a class action, or consolidated with any other Claims
and the arbitrators or arbitration panel shall have no authority to consolidate
claims or certify a class of Claims. Each Shareholder expressly waives any right
it may have to submit or consolidate their Claim with those of other
Shareholders and shall be limited to submitting their individual claim to
arbitration. No arbitrator or arbitration panel shall have the power or
authority to interpret the legality or enforceability of this Section 15.5 (b)
and any such dispute regarding the applicability, legality or enforceability of
this Section 15.5 (b) shall be submitted to and exclusively determined by a
court of law in accordance with the requirements of Section 15.4. If this
Section 15.5(b) is found by a court of law to be invalid or unenforceable under
any law or statute, then the entirety of Section 15.5 shall be null and void
with respect to any Claims and, thereafter, all Claims shall only be resolved by

                                       40


filing an action in a court of law in accordance with Section 15.4 hereof. The
Parties agree that any arbitration shall be postponed during the pendenacy of
any appeal of a court's ruling regarding the legality or enforceability of this
Section 15.5(b).

     15.6 Limited Power of Attorney. Each Investor irrevocably constitutes and
appoints the Manager as his true and lawful attorney-in-fact and agents to
effectuate and to act in his name, place and stead, in effectuating the purposes
of the Fund including the execution, verification, acknowledgment, delivery,
filing and recording of this Agreement as well as all authorized amendments
thereto and hereto, all assumed name and doing business certificates, documents,
bills of sale, assignments and other instruments of conveyances, leases,
contracts, loan documents and counterparts thereof, and all other documents
which may be required to effect a continuation of the Fund and which the Fund
deems necessary or reasonably appropriate, including documents required to be
executed in order to correct typographical errors in documents previously
executed by such Investor and all conveyances and other instruments or other
certificates necessary or appropriate to effect an authorized dissolution and
liquidation of the Fund. The power of attorney granted herein shall be deemed to
be coupled with an interest, shall be irrevocable and shall survive the death,
incompetency or legal disability of an Investor.

     15.7 Disclaimer. In forming this Fund, all Investors recognize that the
Fund's businesses are highly speculative and that neither the Fund nor the
Manager nor any other Managing Person makes any guaranty or representation to
any Investor as to the probability or amount of gain or loss from the conduct of
Fund business.

     15.8 Amendment and Construction of Agreement. (a) This Agreement may be
amended by the Manager, without notice to or the approval of the Investors, from
time to time for the following purposes: (1) to cure any ambiguity, formal
defect or omission or to correct or supplement any provision herein that may be
inconsistent with any other provision contained herein or in the Memorandum or
to effect any amendment without notice to or approval by Investors, as specified
in other provisions of this Agreement; (2) to make such other changes or
provisions in regard to matters or questions arising under this Agreement that
will not materially and adversely affect the interest of any Investor; (3) to
otherwise equitably resolve issues arising under the Memorandum or this
Agreement, so long as similarly situated Investors are not treated materially
differently; (4) to maintain the federal tax status of the Fund and any of its
Shareholders (so long as no Investor's liability is materially increased without
his consent); (5) as otherwise provided in this Agreement or (6) to comply with
law.

     (b) Other amendments to this Agreement may be proposed by either the
Manager or Investors whose aggregate Capital Contributions constitute 25% or

                                       41


more of the Capital Contributions, in each case by calling a meeting or
requesting consents under Section 15.2 and specifying the text of the amendment
and the reasons therefore. No amendment under this Section 15.8(b) that
increases any Shareholder's liability, changes the Capital Contributions
required of him or his rights in interest in the Net Profits, Net Losses,
deductions, credits, revenues or distributions of the Fund in more than a de
minimis manner, his rights on dissolution, or any voting or management rights
set forth in this Agreement shall become effective as to that Shareholder
without his written approval thereof. Unless otherwise provided herein, all
other amendments must be approved by the holders of a Majority of the
outstanding Voting Shares and, if the terms of a series of Shares or securities
so require, by the vote of the holders of such class, series or group specified
therein.

     (c) The Manager has power to construe this Agreement and to act upon any
such construction. Its construction of the same and any action taken pursuant
thereto by the Fund or a Managing Person in good faith shall be final and
conclusive.

     15.9 Bonds and Accounting. The Manager shall not be required to give bond
or otherwise post security for the performance of their duties and the Fund
waives all provisions of law requiring or permitting the same. No person shall
be entitled at any time to require the Fund or any Shareholder to submit to a
judicial or other accounting or otherwise elect any judicial, administrative or
executive supervisory proceeding applicable to non-business trusts.

     15.10 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the Shareholders (and their spouses if the Shares of such
Shareholders shall be community property) as well as their respective heirs,
legal representatives, successors and assigns. This Agreement constitutes the
entire agreement between the Fund and the Shareholders with respect to the
formation and operation of the Fund, other than the Subscription Agreement
entered into between the Fund and each Investor and the Management Agreement.

     15.11 Headings. Headings of Articles and Sections used herein are for
descriptive purposes only and shall not control or alter the meaning of this
Agreement as set forth in the text.

     15.12 Tax Matters Partner. The Manager is the tax matters partner of the
Fund under Code Section 6221.

RIDGEWOOD ENERGY CORPORATION
Initial Manager


By: /s/ Robert E. Swanson, President
    --------------------------------
    Robert E. Swanson, President


                                       42

EX-3.3

                                                                     EXHIBIT 3.3

CONFIDENTIAL MEMORANDUM                             COPY NO.____________________

DATED: February 1, 2006                             NAME OF OFFEREE ____________


                          RIDGEWOOD ENERGY S FUND, LLC
                     Gulf of Mexico Oil and Natural Gas Fund

                       1000 Shares of Beneficial Interest
                          Offered at $150,000 Per Share
                         Minimum Offering of $1,500,000
                        Maximum Offering of $150,000,000

Ridgewood Energy S Fund, LLC, a Delaware limited liability company (the "Fund"),
has been organized to acquire interests primarily in natural gas and oil
projects located in the deep or shallow U.S. waters of the Gulf of Mexico. The
Manager of the Fund (the "Manager") is Ridgewood Energy Corporation, a Delaware
corporation. The Fund is offering up to an aggregate of 1000 Shares of
beneficial interest ("Shares") at a purchase price of $150,000 per Share. See
Terms of the Offering.




- ------------------------------ ------------------------ ---------------------------- -----------------------------------
                                                                                            Funds Available for
                                                            Organizational and              Gas Investments and
           Shares                Price to Investors         Offering Expenses**               Fund Operations
- ------------------------------ ------------------------ ---------------------------- -----------------------------------
                                                                                        
         Minimum 10                  $1,500,000                  $255,000                        $1,245,000
        Maximum 1000*               $150,000,000                $25,500,000                     $124,500,000
- ------------------------------ ------------------------ ---------------------------- -----------------------------------


*The Fund in its discretion may expand the maximum offering up to 1,335 Shares
or more.
**Expenses incurred in the offer and sale of the Shares, including commissions,
placement, legal, accounting, printing and filing fees, and a one-time
investment fee to the Manager.

THIS INVESTMENT IS SPECULATIVE AND NON-LIQUID AND INVOLVES A HIGH DEGREE OF
RISK, INCLUDING:
o    Severe restrictions on transferability of the Shares.
o    Drilling to establish productive natural gas or oil wells is highly risky
     and the investment in wells could be completely lost.
o    The Manager may have material conflicts of interest and has total control
     of the Fund.
o    The significant federal and state income tax benefits of investing in the
     Fund and the applicable laws may be changed at any time.
There are many other risks as explained at Risk Considerations. Purchases will
be accepted only from persons meeting the requirements set forth under Investor
Suitability Standards.

THESE SHARES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR ANY OTHER FEDERAL OR STATE AGENCY. NO REGULATORY AUTHORITY HAS
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS CONFIDENTIAL MEMORANDUM OR THE
OFFER AND SALE OF THESE SHARES. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

                        RIDGEWOOD SECURITIES CORPORATION
                               947 Linwood Avenue
                           Ridgewood, New Jersey 07450
                                 (201) 447-9000




                                  SHORT SUMMARY
                          RIDGEWOOD ENERGY S FUND, LLC
                     Gulf of Mexico Natural Gas and Oil Fund


Securities Offered:           1000 Shares ($150,000 per Share)


Amount Offered:               Maximum:  $150,000,000       Minimum:  $1,500,000

The S Fund Continues a        The S Fund is a continuation  of the series of
Series of Gulf of Mexico      Ridgewood Energy "Alphabet Funds" which have
Funds:                        invested in natural gas and oil properties in the
                              Gulf of Mexico, which began with the B Fund in
                              1992. After the B Fund, Ridgewood Energy offered
                              successive Alphabet Funds through, most recently,
                              the R Fund, which began offering shares on January
                              2, 2006. The Alphabet Funds have invested in major
                              natural gas and oil projects in the Gulf of Mexico
                              in partnership with major oil and gas companies

Natural Gas and Oil Prices    The average price of natural gas for the past year
Increase:                     is more than double the average price in the
                              decade of the 1990s. In addition, oil prices have
                              increased significantly over the last several
                              years and both natural gas and oil prices are
                              predicted to remain at high levels for the
                              foreseeable future

Long Term Shortages:          The demand for natural gas and oil is expected to
                              continue to exceed supply for the foreseeable
                              future, sustaining high prices.

Gulf of Mexico Discoveries:   Major oil and gas companies focus their domestic
                              drilling activities in the United States waters of
                              the Gulf of Mexico as the primary North American
                              region with (i) potentially significant quantities
                              of natural gas and oil, combined with, (ii) an
                              existing pipeline infrastructure in some areas of
                              the region enabling a fast track to rapid
                              production and early cash flow.

Only Ridgewood Energy:        Ridgewood Energy was founded in 1982. Ridgewood
                              Energy Funds have been investing in the Gulf of
                              Mexico since 1986. Ridgewood Energy is the only
                              program sponsor in the United States consistently
                              offering high net worth individuals direct,
                              institutional quality offshore natural gas and oil
                              investments in partnership with experienced
                              independent and major energy companies.


                                        i




Track Record of                              Date       First        December*     Distributions     Cumulative
"Alphabet Funds":                           Closed   Distribution     Monthly           For         Distributions
                                            ------   ------------   Distribution     12 Months         through
                                                                    ------------       Ended        December 2005*
                                                                                     December*     ---------------
                                                                                       2005
                                                                                       ----
                                                                                          
                            B Fund            3/92       2/93           .8%             9.6%             262.1%
                            C Fund           10/92       2/93           .8%             9.6%             262.1%
                            D Fund            7/98       9/99            -               -               101.2%
                            E Fund            6/99       9/99         10.7%           117.2%             526.7%
                            F Fund            6/00      12/00          4.8%            33.0%             150.5%
                            G Fund            7/01       2/02          6.6%            78.1%             243.7%
                            H Fund            9/03       4/04          4.0%            37.1%              46.9%
                            I Fund           12/03       1/05          1.1%             6.5%               6.5%
                            J Fund            3/04       6/05           .5%             3.3%               3.3%
                            K Fund            8/04       6/05           .2%             1.7%               1.7%
                            L Fund            9/04      11/05           .8%             1.4%               1.4%
                            M Fund           11/04        -             -               N/A                N/A
                            N Fund            2/05      11/05          1.8%             3.1%               3.1%
                            O Fund            8/05        -             -               N/A                N/A
                            P Fund            9/05        -             -               N/A                N/A
                            Q Fund           12/05        -             -               N/A                N/A
                            R Fund             -          -             -               N/A                N/A


                              * Except for the L Fund and the N Fund, which made
                              distributions of 3% and 7% respectively in the
                              month of January, the other Ridgewood Energy
                              Alphabet Funds did not make a distribution in the
                              month of January 2006. Generally, revenue earned
                              in October of 2005 would have been used for such
                              distribution; however, due to damage to pipeline
                              infrastructure equipment owned by non-Ridgewood
                              entities as a result of Hurricane Rita, the
                              Ridgewood Energy Funds were unable to market their
                              natural gas and oil in sufficient quantities to
                              justify a January 2006 distribution. The damage to
                              these facilities has largely been repaired and all
                              of the Ridgewood funds are operating under normal
                              conditions.

                              THE PERFORMANCE AND THE RESULTS OF PRIOR RIDGEWOOD
                              ENERGY ALPHABET FUNDS DOES NOT PREDICT SUCCESS OF
                              OR GUARANTEE SIMILAR RESULTS FOR THE S FUND. (See
                              Risk Considerations and Exhibit B Track Record.)

Early Investment Incentive    The Manager at any time during this Offering may
                              have opportunities to invest in economically
                              promising transactions for the Fund. The Manager
                              is currently investigating such a transaction that
                              would require an investment by the Fund
                              potentially as early as mid-February 2006. Early
                              Investors who provide capital to the Fund to
                              acquire such Projects, which ultimately provide
                              benefits to all Fund Investors, will receive an
                              incremental benefit. The Fund is offering to such
                              Early Investors an Early Investment Incentive upon
                              the following terms and conditions:

                                        o         Investors who subscribe to the
                                                  Fund between February 1, 2006
                                                  and February 28, 2006 and have
                                                  fully paid their Capital
                                                  Contribution shall be entitled
                                                  to receive an Early Investment
                                                  Incentive equal to $12,000 per
                                                  $150,000 Share.
                                        o         Investors who subscribe to the
                                                  Fund between March 1, 2006 and
                                                  March 31, 2006 and have fully
                                                  paid their Capital
                                                  Contribution shall be entitled
                                                  to receive an Early Investment
                                                  Incentive equal to $8,000 per
                                                  $150,000 Share.

                                       ii

                                        o         Investors who subscribe to the
                                                  Fund on or after April 1, 2006
                                                  shall not be entitled to, nor
                                                  shall they receive, an Early
                                                  Investment Incentive.
                                        o         The Manager anticipates that
                                                  the Early Investment
                                                  Incentive, as described
                                                  herein, shall be paid either
                                                  monthly or quarterly and begin
                                                  when the Manager determines
                                                  that the Fund has sufficient
                                                  cash flow. The Manager will
                                                  continue such payments, as
                                                  described herein until the
                                                  Early Investment Incentive to
                                                  Investors entitled to such
                                                  incentive has been paid in
                                                  full. Thereafter, all
                                                  Investors share in
                                                  distributions of the Fund in
                                                  accordance with their
                                                  individual ownership
                                                  percentage.
                                        o         Other than any right to
                                                  receive an Early Investment
                                                  Incentive, all other rights,
                                                  privileges and obligations of
                                                  Investors of the Fund shall
                                                  remain as described herein and
                                                  as set forth in the LLC
                                                  Agreement. Except for an Early
                                                  Investment Incentive, as
                                                  described herein, all
                                                  Investors have equal rights as
                                                  described in this Memorandum
                                                  and set forth in the LLC
                                                  Agreement.

Proposed Activities Gulf      The investment objective of the Fund is to
of Mexico Natural Gas         generate current cash flow for distribution to
and Oil Projects:             Investors from acquiring, drilling, completing and
                              developing natural gas and/or oil projects in
                              shallow or deep waters of the Gulf of Mexico. The
                              Fund will attempt to build a balanced portfolio of
                              natural gas and oil projects ("Projects") which
                              are described in the Memorandum and may include,
                              without limitation, the following:
                              o         Higher risk exploratory Projects which
                                        may include deep drilling below 15,000
                                        feet in shallow waters, perhaps near
                                        pipeline infrastructure and which
                                        projects have high economic potential.
                                        The higher risk Projects would, if
                                        successful, generally include a
                                        substantial amount of development
                                        capital which would have lower risk, but
                                        at the same time, greater economic
                                        potential.
                              o         Higher risk exploratory Projects located
                                        in the deepwaters of the Gulf of Mexico,
                                        which Projects, although potentially
                                        more costly to develop and longer to
                                        complete, may potentially have
                                        significantly greater potential for
                                        reservoirs than in the shallower waters
                                        of the Gulf of Mexico.
                              o         Lower risk developmental Projects which
                                        are already connected to pipelines, or
                                        which are near the pipeline
                                        infrastructure and can be connected
                                        quickly.

Tax Benefits:                 The Fund's interests in the Projects may generate
                              significant drilling deductions, depreciation
                              deductions and depletion allowances.

                                       iii


Summary:                      I.        A long term supply of natural gas and/or
                                        oil are the commodities to own due to
                                        long-term supply shortages which have
                                        resulted in high prices.

                              II.       The United States waters of the Gulf of
                                        Mexico is the place to own natural gas
                                        or oil wells.

                              III.      Ridgewood Energy offers institutional
                                        quality Gulf of Mexico natural gas and
                                        oil investments to high net worth
                                        individuals.

Sharing of Income and Gain:   Investors:                                     85%
                              Manager:                                       15%
Use of Proceeds:              Acquisition, Drilling and                      83%
                              Completion and Fund Operations
                              Syndication Fees and Closing Costs:            17%


THE INFORMATION CONTAINED IN THIS SHORT SUMMARY IS EXTREMELY GENERAL IN NATURE,
IS BASED ON, AMONG OTHER THINGS, PAST PERFORMANCE, FORECASTS OF NATURAL GAS AND
OIL PRICES AND CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS ABOUT DEVELOPMENT
PLANS, FUTURE RESULTS OF EXISTING RIDGEWOOD ENERGY PROGRAMS, EXPECTED PRODUCTION
RATES, CAPITAL EXPENDITURES AND NATURAL GAS AND OIL RESOURCE POTENTIAL. THESE
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. THE ACTUAL RESULTS ACHIEVED
BY THE S FUND, OR ANY OTHER RIDGEWOOD ENERGY FUND, WILL VARY, PERHAPS
SUBSTANTIALLY, FROM THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS SHORT
SUMMARY AND COULD BE MATERIALLY WORSE. POTENTIAL INVESTORS MUST REVIEW FULLY THE
ENTIRE CONFIDENTIAL OFFERING MEMORANDUM, INCLUDING RISK CONSIDERATIONS AND TRACK
RECORD, TO UNDERSTAND THE MANY RISKS ASSOCIATED WITH AN INVESTMENT IN THE S
FUND.


                                       iv


                                TABLE OF CONTENTS

                                                                            PAGE

SUMMARY OF PROGRAM.............................................................i
GENERAL........................................................................1
INVESTOR SUITABILITY STANDARDS.................................................3
MANAGER........................................................................4
PROPOSED ACTIVITIES............................................................4
USE OF PROCEEDS...............................................................16
RISK CONSIDERATIONS...........................................................16
         General Risks Related to Natural Gas or Oil Exploration,
         Drilling, Pipelines and Operations...................................17
         Particular Risks Related to the Shares...............................22
TERMS OF THE OFFERING.........................................................28
PLAN OF DISTRIBUTION..........................................................29
PARTICIPATION IN COSTS AND REVENUES...........................................30
COMPENSATION..................................................................33
FIDUCIARY RESPONSIBILITIES OF MANAGER.........................................35
CONFLICTS OF INTEREST.........................................................38
MANAGEMENT....................................................................41
TAX ASPECTS...................................................................44
ADDITIONAL ASPECTS OF LLC AGREEMENT...........................................76
LIABILITY.....................................................................81
OTHER INFORMATION.............................................................82
         General..............................................................82
         Authorized Sales Material............................................83
LEGAL MATTERS.................................................................83
LITIGATION AND OTHER PROCEEDINGS..............................................84
DEFINITIONS...................................................................87

                                 LIST OF TABLES

USE OF PROCEEDS...............................................................16
COMPENSATION..................................................................33

                                LIST OF EXHIBITS

FORM OF LLC AGREEMENT..................................................EXHIBIT A
RIDGEWOOD ENERGY CORPORATION TRACK RECORD..............................EXHIBIT B
FINANCIAL STATEMENTS OF RIDGEWOOD ENERGY CORPORATION...................EXHIBIT C
INVESTOR SUBSCRIPTION BOOKLET (BOUND SEPARATELY).......................EXHIBIT D
2006126



                                     GENERAL

     Certain provisions of the Fund's Limited Liability Company Agreement ("LLC
Agreement") and Subscription Agreement are summarized in several places
throughout this Memorandum. Although certain important provisions of these legal
documents are properly described in this Memorandum, provisions that may be
important to you may not be described in this Memorandum or described to your
satisfaction. Therefore, potential investors must review these legal documents,
as well as the Memorandum, in order to fully understand the terms of this
Offering. If the legal document differs from its description in this Memorandum
or if there is a conflict between the provisions of this Memorandum and a legal
document, the provisions of the legal document will control.

     The DEFINITIONS section begins on page 87.

     You should rely only on the information contained in this Memorandum and
its exhibits. The Fund has not authorized anyone to provide you with any other
information. However, the Fund understands that you may need additional
information before making a decision to buy Shares. The Fund will provide you
with any relevant additional information that the Fund has, can obtain or can
prepare without unreasonable effort or expense. However, you should only rely on
that additional information if it is given to you in writing and is signed on
behalf of the Fund. Because the Shares are being offered in a private offering,
if you receive this Memorandum or other offering materials and do not buy
Shares, you agree to return the Memorandum and other materials to us.

     IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE FUND AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED. THE SHARES OF THE FUND HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

     THE SHARES OF THE FUND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE LLC
AGREEMENT AND UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL HAVE TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.


                                       1


     THE SHARES OF THE FUND ARE BEING OFFERED PURSUANT TO RULE 506 OF REGULATION
D PROMULGATED UNDER THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, AND THE
RELEVANT SECURITIES LAWS AND REGULATIONS OF CERTAIN STATES.

Forward-Looking Statement

     Except for historical information, the Fund has made statements in this
Memorandum and its exhibits that constitute forward-looking statements, as
defined by the federal securities laws. These statements are subject to risks
and uncertainties. Forward-looking statements include statements made regarding
events, financial trends, future operating results, financial position, cash
flows and other general information concerning possible or assumed future
results of operations of the Fund or any prior Ridgewood Energy Program.
Investors are cautioned that such statements are only predictions, forecasts or
estimates of what may occur and are not guarantees of future performance or of
the occurrence of events or other factors used to make such predictions,
forecasts or estimates. Actual results may differ materially from those results
expressed, implied or inferred from these forward-looking statements and may be
worse due to a variety of factors including, without limitation, change in law,
fluctuations in natural gas and oil commodity prices, adverse weather, and
general delays in drilling, exploration or production. Finally, such statements
reflect the Fund's current views. The Fund undertakes no obligation to publicly
release the results of any revisions to the forward-looking statements made
herein to reflect events or circumstances that occur after today or to reflect
the occurrence of unanticipated events, provided however, that the Fund will
undertake to update this Memorandum to reflect events which materially change
the nature of this Offering that occur prior to the termination of the Offering.


                                       2


                         INVESTOR SUITABILITY STANDARDS

AN INVESTMENT IN THE SHARES OF THE FUND IS ILLIQUID AND INVOLVES SIGNIFICANT
RISKS AND IS NOT A SUITABLE INVESTMENT FOR ALL PROSPECTIVE INVESTORS. See Risk
Considerations.

Investor Qualifications
- -----------------------

     The Fund and the offering of Investor Shares are primarily structured to
comply with the private offering exemption under the federal Securities Act of
1933, as amended (the "Act"). In addition, the Fund is also structured to comply
with an exemption from certain restrictions on compensation under the Investment
Advisers Act of 1940 ("Advisers Act") as well as the rules and regulations
promulgated under the Act and Advisers Act by the Securities and Exchange
Commission (the "Commission"), as well as certain state laws and regulations
which impose limitations on the persons who may invest in Shares of the Fund and
from whom subscriptions may be accepted. Accordingly, the Fund is offering and
selling Investor Shares only to "accredited investors" as defined in Regulation
D under the Act who are also "qualified clients" as defined by Rule 205-3 of the
Adviser's Act, which investors will include without limitation:

     o    a natural person who has a net worth (including assets jointly owned
          with his or her spouse) of more than $1,500,000 at the time of
          purchase; or

     o    a company, trust, employee benefit plan, or other entity (an "Entity")
          that has $1,500,000 in net worth and $5,000,000 in assets, in which
          case such Entity is also an accredited investor, provided however, if
          the Entity is (a) a private investment company excepted from
          registration by Section 3(c)(1) of the Investment Company Act of 1940
          ("the "1940 Act"); (b) an investment company registered under the 1940
          Act; (c) a business development company (as defined in Section
          202(a)(22) of the Advisers Act); or (d) does not have $5,000,000 in
          assets, then such Entity can not invest in the Fund unless, in
          addition to the Entity having $1,500,000 or more in net worth, each
          equity owner of the Entity satisfies the $1,500,000 net worth
          requirement as well, which would then permit the Entity to invest in
          the Fund.

For purpose of meeting the $1,500,000 net worth requirement, an investor's
equity in residences, furnishings and automobiles can be included.


                                       3


For purposes of "accreditation" generally, a natural person will be an
"Accredited Investor" if he or she (or if spouses jointly) have in excess of
$1,500,000 in net worth. However, for an Entity, in addition to the $1,500,000
net worth requirement, it must have total assets in excess of $5,000,000 in
order to be accredited or, failing that, all equity owners of such entity must
meet the $1,500,000 net worth requirement.

     IF YOU DO NOT MEET THE REQUIREMENTS DESCRIBED ABOVE, DO NOT READ FURTHER
AND RETURN THIS MEMORANDUM TO RIDGEWOOD SECURITIES CORPORATION. IF YOU DO NOT
MEET SUCH REQUIREMENTS, THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL
SHARES OF THE FUND TO YOU.

     Except in certain limited circumstances, United States federal law
prohibits the holding of interests in federal oil and gas leases by persons or
an Entity who are not citizens, nationals or permanent resident of the United
States. Each prospective Investor must represent whether he or she is a citizen
or national of the United States. The Fund shall have absolute discretion to
refuse to accept a subscription from such non-U.S. citizens or entities.

                                     MANAGER

     The Manager of the Fund is Ridgewood Energy Corporation, a Delaware
corporation that is wholly owned by Robert E. Swanson. See, Management and
Fiduciary Obligations of the Manager for more information.

PROPOSED ACTIVITIES

     The primary investment objective of the Fund is to generate current cash
flow for distribution to Investors from acquiring, drilling, developing and
completing natural gas and oil projects in the offshore shallow or deep waters
of the Gulf of Mexico ("Projects" or "the Fund's Projects"). The Fund cannot at
this time identify specifically the Projects in which it will invest or the
drilling and other activities in which the Fund will engage for a variety of
reasons. Among these reasons are that the Fund has yet to acquire Working
Interests in any Project lease or well and will do so only after this Offering
is completed or when sufficient capital is available to the Fund to make any
such acquisition. The Manager will make decisions as to the management,
business, and affairs of the Fund in its sole discretion and judgment as to what
is in the best interest of the Fund. The Manager intends to cause the Fund to


                                       4


acquire interests in as many Projects as is possible, given the funds raised,
the size of the interest acquired, and risk considerations. The Manager
anticipates that all of the Fund's Projects will be located in the offshore
shallow or deep waters of the Gulf of Mexico. However, at the present time the
Fund has not conclusively committed to any specific sites, leases or regions of
the Gulf of Mexico. No geological, engineering or other information about any
specific area is included in this Memorandum and the Fund is not committing to
provide any such information to an Investor. The decision of the Fund to acquire
a Project, the size and nature of the interest acquired, the location of the
Project, and the terms of such acquisition will be based upon evaluations of the
various properties conducted by the Manager after consultation with independent
geologists or engineers. See Risk Considerations.

     With that background, the Manager of the Fund, in its sole discretion,
intends to invest in one or more of the following types of Projects:

     o    Lower risk developmental Projects which are already connected to
          pipelines, or which are near the pipeline infrastructure and can be
          connected quickly.

     o    Higher risk exploratory Projects in the shallow waters of the Gulf of
          Mexico which may include deep drilling below 15,000 feet. Such
          Projects may have high economic potential and may be near pipeline
          infrastructure. These higher risk Projects would, if successful,
          generally require a substantial amount of development capital, which
          would have lower risk, but at the same time, greater economic
          potential.

     o    Higher risk exploratory Projects located in the deepwaters (generally
          greater than 1,000 feet water depth) of the Gulf of Mexico, which
          Projects, although potentially more costly and risky to develop and
          take longer to complete, may potentially have significantly greater
          potential for productive reservoirs than in the shallower waters of
          the Gulf of Mexico.

     o    Non-Consent Interests, which may include interests acquired from prior
          Ridgewood Energy Programs.

     o    Ownership, development, construction, installation, acquisition,
          and/or operation of infrastructure assets, including pipelines,
          equipment and other assets, located or to be located in the offshore
          waters of the Gulf of Mexico, that are used to gather, process,
          transport and market natural gas or oil.


                                       5


     In addition, the Fund's activities may result in certain tax benefits,
consisting principally of deductions for intangible drilling costs, depletion,
and depreciation. See Tax Aspects. In considering Projects, the Manager
investigates each such Project against a list of factors that it believes will
result in the selection of those Projects that have the highest probability of
success. These factors, in no particular order, include, but are not limited to,
the following (i) targeting Projects that have or are expected to have operators
with significant resources and experience in oil and gas exploration; (ii)
targeting Projects that have or are expected to have partners that also have
significant resources and experience in oil and gas exploration; (iii) technical
quality of the Project including its geology, seismic profile, locational
trends, and whether the Project has potential for multiple prospects; (iv) oil
or gas reserve potential; (v) whether and the extent to which the operator
participates as a Working Interest owner in the Project; (vi) economic factors,
such as potential revenues from the Project, the rate of return, and estimated
time to first production; (vii) risk factors; (viii) existence of drilling rigs,
platforms and other infrastructure, at or nearby the Project; (ix) proposed
drilling schedule; (x) terms of the proposed transaction, including contractual
restrictions and obligations and lease term; and (xi) overall cost of the
Project.

Working Interest in Leases

The Projects that may be acquired by the Fund are expected to be located in the
waters (either shallow or deepwaters) of the Gulf of Mexico offshore on the
Outer Continental Shelf ("OCS"). The Fund anticipates that its operations and
activities would then be governed by, among other things, the Outer Continental
Shelf Lands Act ("OCSLA"), which was enacted in 1953.

     Under OCSLA, as amended, the federal government has jurisdiction over oil
and natural gas development on the OCS. Pursuant to the OCSLA, the Secretary of
the Interior is empowered to sell exploration, development and production leases
of a defined submerged area of the OCS - a "Block" - through a competitive
bidding process. Such activity is conducted by the Minerals Management Services
("MMS"), an agency of the United States Department of Interior. As part of the
leasing activity and as required by the OCSLA, the leases auctioned include
certain lease terms such as the length of the lease, the amount of royalty to be
paid, lease cancellation and suspension, and, to a degree, the "planned
activities" of exploration and production to be conducted by the lessee. In
addition, the OCSLA grants the Secretary of the Interior continuing oversight
and approval authority over exploration plans throughout the term of the lease.


                                       6


     The winning bidder(s) at the lease sale - or Lessee(s) - are given a lease
by the MMS that grants such lessee the exclusive right to conduct oil and
natural gas exploration and production activities within a specific lease Block.
The Lessee's rights to conduct such activities are called "Working Interests"
and such Lessee obtains "title" to its particular ownership share of the Working
Interest. Leases in the OCS are generally issued for a primary lease term of 5,
8 or 10 years depending on the water depth of the lease Block. During this
"primary lease term", except in limited circumstances, Lessees are not subject
to any particular requirements to conduct exploratory or development activities
but in order to retain the lease rights beyond the initial term, the lessees
must proceed with "due diligence" to begin exploration activities. However, once
a Lessee begins exploration, the lease term generally is extended for so long as
the well continues in commercial production.

     The Lessee of a particular Block, for the term of the lease, has the right
to drill and develop exploratory wells and conduct other activities throughout
the Block - i.e. Working Interests. If the initial well on the Block is
successful, a Lessee (or the Operator) may conduct additional geological studies
and may determine to drill additional developmental wells. If a developmental
well is to be drilled in the Block, each Lessee owning Working Interests in the
Block must be offered the opportunity to participate in, and cover the costs of,
such developmental well up to that particular Lessee's Working Interest
ownership percentage. Generally, if the Lessee elects to not participate in the
additional well, it will lose its rights to such additional well. The rights of
such non-participating Lessee to participate in such additional well in the
Block will then either be acquired by the remaining Lessees or sold to third
parties. Such rights are called Non-Consent Interests because they arise as a
result of an existing Working Interest owner's failure to "consent" to supply
additional capital for drilling new wells or other activities. Unlike a "Working
Interest" owner, a "Non-Consent Interest" owner does not obtain title and
ultimately the Non-Consent Interest reverts back to the original Working
Interest owner when the participating parties in the well have received a
penalty amount from the production attributable to the Non-Consent Interest.
While the Manager intends to focus primarily on Working Interests, any
Non-Consent Interest that the Fund will investigate or invest in will have
significant potential for economic returns to Investors.

     Generally, the Working Interests in an offshore lease under the OCSLA are
burdened by a 16.67% royalty payable to the federal government. Therefore, the
net revenue interest of the holders of 100% of the Working Interest in the
Projects in which the Fund will invest is approximately 83.33% of the total


                                       7


revenue of the Project and further reduced by any other royalties that apply to
a lease block. However, as described below, the MMS has adopted royalty relief
both for existing OCS leases for those who drill deep wells in shallow waters
and for drilling in deepwater. See, MMS Deep Gas royalty Incentive: Royalty
Relief and Deepwater Royalty Relief.

MMS Deep Gas Royalty Incentive:  Royalty Relief

     On January 26, 2004, the MMS promulgated new rules providing for incentives
for companies to increase deep natural gas production in the shallow waters of
the Gulf of Mexico ("Royalty Relief Rule"). Under the Royalty Relief Rule, the
MMS will suspend royalties otherwise applicable for a certain amount of natural
gas production when companies take the risk of exploring and developing deep-gas
wells in shallow water areas that they have already leased. The purpose of the
Royalty Relief Rule is to provide incentives for the development of such wells
in which natural gas or oil production can come online quickly because the
infrastructure (i.e., platforms and pipelines) to some degree is already in
place. Under the Royalty Relief Rule, lessees will be eligible for royalty
relief on their existing leases if they drill for new and deeper reserves at
depths greater than 15,000 feet below sea level. In addition, an even larger
royalty relief would be available for wells deeper than 18,000 feet.

Public Policy for MMS Royalty Relief

     The Royalty Relief Rule illustrates a number of extremely important points.
The motivation of the government, or the public policy behind the Royalty Relief
Rule, is to stimulate exploration for major new gas fields in the shallow waters
of the Gulf of Mexico where:

     o    government geologists and industry geologists generally agree
          represents the highest short term potential for discovering major new
          gas fields in the lower 48 states; and
     o    these new gas fields are located near existing pipeline
          infrastructure, thus enabling wells in such areas to quickly be
          brought on production.

     It should be noted that the Royalty Relief Rule does not extend to deep
waters of the Gulf of Mexico off the continental shelf. See, Deepwater Royalty
Relief. The Royalty Relief Rule is limited to leases in a water depth less than
600 feet. The U.S. Government has leased massive areas of the Gulf in deep
waters, and in ultra deep waters, which basically are areas with water depth of
1,000 feet to 10,000 feet. The government did not extend the Royalty Relief Rule
to the deep waters and ultra deep waters because there is comparatively less
pipeline infrastructure in place to quickly bring those discoveries to market.
The Royalty Relief Rule applies to areas of the Gulf of Mexico where gas, if
found, can quickly benefit the U.S. economy by coming to market. See, Deepwater
Royalty Relief


                                       8


Deepwater Exploration Activities

     The Fund will investigate, consider and possibly invest in Projects
proposed to be located in the "deepwater" of the Gulf of Mexico. Generally,
deepwater is defined as water depths in excess of 1,000 ft, although for certain
purposes (e.g., deepwater royalty relief) water depths may be less.

     Exploration and production activities in the deepwater of the Gulf of
Mexico have accelerated during the past several years and it is the view of many
in the industry that such activity will significantly increase in the near
future. There are a variety of reasons for this increased activity including,
but not limited to, improvements to and new technologies for deepwater drilling,
development and production; the discovery of major natural gas and oil fields in
deepwater that have yielded wells with significant flow rates; deepwater royalty
relief; improved seismic technologies; and the declining production from
resources in the shallow waters of the Gulf of Mexico. While most deepwater
exploration activities seem to be targeted more towards oil reservoirs as
opposed natural gas, there have been some large and significant natural gas
discoveries in the deepwater of the Gulf of Mexico and more development of
deepwater natural gas prospects is expected in the future.

     Generally, exploration and production activities in deepwater follow the
same principals as in shallower waters and with the same associated risks,
although deepwater exploration drilling presents additional challenges beyond
those faced in shallower waters. Given the water depths, drilling, development
and production activities tend to be more complicated and expensive. For
example, for both drilling and production, platforms fixed to the seafloor may
be both impractical and cost prohibitive depending on the water depths. In such
cases, drilling and production activities would be undertaken by floating
drilling rigs and production systems. These floating systems may be more
susceptible to adverse weather conditions, such as hurricanes, and may be more
costly and, in light of increased activity in deepwater, may be in short supply
and thus more difficult to obtain and schedule. In addition, transportation and
gathering systems are more prevalent and less costly in the shallow waters of
the Gulf of Mexico. In many deepwater areas of the Gulf of Mexico,
transportation infrastructure is either inadequate or non-existent, pressures
are greater, the water colder, and ocean currents stronger, all of which may
make exploration and production in deepwater more costly and time consuming than
in shallow waters.


                                       9


Deepwater Royalty Relief

     The Deep Water Royalty Relief Act of 1995 (the "Deepwater Relief Act") was
enacted to promote exploration and production of natural gas and oil in the
deepwater of the Gulf of Mexico and relieves eligible leases from paying
royalties to the U.S. Government on certain defined amounts of deepwater
production. The Deepwater Relief Act expired in the year 2000 but the relief was
extended by the MMS to promote continued interest in deepwater. For purposes of
royalty relief, the MMS defines deepwater as depths in excess of 656 feet (200
meters).

     Currently, for leases entered into after November 2000, the MMS assigns a
lease specific volume of royalty suspension based on how the suspension amount
would affect the economics of the lease's development. The lease is given an
automatic royalty suspension by the MMS and such lease is referred to as a
"royalty suspension lease." Any such royalty suspension applicable to a
particular lease is generally set forth in the lease auction materials prepared
by the MMS. The amount of the suspension, if any, is not determined by water
depth levels (as it had in the past) but rather based upon the MMS' view of the
characteristics and economics of the project. For example, projects deemed
relatively secure and safe such as those near existing transportation
infrastructure may receive no royalty relief while a similar project far away
from any such infrastructure or in an area deemed more risky may receive
significant royalty relief. In addition, all post 2000 leases can apply to the
MS for discretionary royalty relief.

     As a result, unlike the royalty relief associated with deep drilling in
shallow waters, there is no formulaic or predictable means of determining in
advance whether and to what extent royalty relief would be available for a
potential deepwater project.

Improved Seismic Data Reduces Risk for Deeper Drilling in Shallow Water and
Deepwater

     Seismic surveys are performed to gather information on various formations
including subsurface geological formations as well as information used to
identify, among other things, potential geological hazards and environmentally
sensitive areas. Developing and improved three-dimensional seismic technologies
can provide a more accurate assessment of potential natural gas or oil
reservoirs so that exploration and development wells can be optimally located
and thereby reduce the potential number of wells needs to develop a field.

     As a result of improved seismic technology, drilling wells in shallow
waters deeper than 15,000 feet below the sea bottom and wells in deepwater is
now technologically feasible and less problematic, but may add some additional
expense.


                                       10


Pipeline and Gathering Infrastructure

     It has been estimated by the U.S Department of Energy that investment in
pipeline and distribution infrastructure, both to maintain existing
infrastructure and expand it, may average $8 billion per year during the next 5
to 10 years. Therefore, as demand for natural gas and oil further outstrips
supply more pipelines and other gathering infrastructure will be needed.
Although the Manager intends to focus primarily on obtaining interests in
natural gas or oil wells, opportunities in the area of pipeline and gathering
infrastructure may arise, either independently or in conjunction with or as part
of a Working Interest. The Manager, in its discretion, may conclude that an
investment by the Fund in such infrastructure and activities is in the best
interests of the Fund.

     Pipeline "gathering systems" are designed to collect the natural gas or oil
from the producing fields for transportation to the appropriate processing
facilities. Gathering systems normally consist of one or more small diameter
pipelines that are connected to and deliver natural gas or oil from the field,
where it is extracted from the earth, to a central processing point. Once
gathered through these pipelines from individual wells the natural gas or oil is
transported to a processing facility, such as an oil refinery.

     The Fund will be focused primarily on natural gas or oil Projects but may
consider investments in pipeline and other infrastructure on a stand-alone basis
or as may be required as part of a larger Project.

Commodity Purchase and Sale Agreement

     As of the date of this Offering, no definitive arrangements have been made
for the sale or transportation of either the natural gas or oil that may be
produced from the Projects or transported in any pipelines that the Fund may
own. The Fund believes, however, that it is likely that natural gas or oil from
the Projects described herein will have access to pipeline or other economic
transportation alternatives and can be marketed. See Risk Considerations.
Early Investment Incentive

     The Manager at any time during this Offering may have opportunities to
invest in economically promising transactions for the Fund. The Manager is
currently investigating such a transaction that may require an investment by the
Fund potentially as early as mid-February of 2006. Early Investors who provide
capital to the Fund to acquire such Projects, which ultimately provide benefits


                                       11


to all Fund Investors, will receive an incremental benefit. The Fund is offering
to such Early Investors an Early Investment Incentive upon the following terms
and conditions:

          o    For Investors who subscribe to the Fund between February 1, 2006
               and February 28, 2006 and have fully paid their Capital
               Contribution shall be entitled to receive an Early Investment
               Incentive equal to $12,000 per $150,000 Share.
          o    For Investors who subscribe to the Fund between March 1, 2006 and
               March 31, 2006 and have fully paid their Capital Contribution
               shall be entitled to receive an Early Investment Incentive equal
               to $8,000 per $150,000 Share
          o    Investors who subscribe to the Fund on or after April 1, 2006
               shall not be entitled to, nor shall they receive, an Early
               Investment Incentive.
          o    The Manager anticipates that the Early Investment Incentive, as
               described herein, shall be paid either monthly or quarterly and
               begin when the Manager determines that the Fund has sufficient
               cash flow. The Manager will continue such payments, as described
               herein until the Early Investment Incentive to Investors entitled
               to such incentive have been paid in full. Thereafter, all
               Investors share in distributions of the Fund in accordance with
               their individual ownership percentage.
          o    Other than any right to receive an Early Investment Incentive,
               all other rights, privileges and obligations of Investors of the
               Fund shall remain as described herein. Except for an Early
               Investment Incentive, as described herein, all Investors have
               equal rights as described in this Memorandum and set forth in the
               LLC Agreement.

Voluntary Additional Capital Contributions and Supplemental Offering of Shares

     The LLC Agreement does not provide for any mandatory assessments of capital
from Investors. This means that the Fund cannot require any Investor to
contribute more money after such Investor completes his subscription and pays
his initial Capital Contributions. The Fund anticipates that the net funds to be
raised by this Offering will be adequate to pay and provide sufficient reserves
for the Fund's share of all costs of acquiring, drilling and completing the
Projects. However, if the Fund should require additional cash in the future for
certain purposes such as drilling, completing and developing additional wells or
if the Manager determines that the Fund should participate in drilling,
completing, equipping, re-working or re-entering any such additional well


                                       12


("Additional Well Activities"), the Manager may determine, in its discretion, to
fund these Additional Well Activities through the use of Fund cash flow or by
borrowing. (Although the Manager has authority to borrow money, no Alphabet Fund
has ever borrowed money, and the Manager does not intend to borrow in the
future.) Alternatively, the Fund may, but is not obligated to, ask Investors, if
they desire, to participate in these Additional Well Activities by making
voluntary "Additional Capital Contributions". If voluntary Additional Capital
Contributions are requested by the Fund to fund Additional Well Activities, the
Manager will do so through a supplemental offering of a separate class or series
of shares. The LLC Agreement provides for the creation and offering of any such
class or series and provides the Manager with discretion in determining the
nature, scope, amount and terms of such supplemental offering of a class or
series of shares. Such discretion is necessary in order to provide the Manager
with sufficient flexibility to fashion such supplemental offering in a way that
best responds to the proposed project, as well as market conditions that exist
at that time. In any event, the opportunity to participate in such supplemental
offering of shares and make Additional Capital Contributions will be apportioned
among all Investors in proportion to their initial Capital Contributions. If
Investors who elect to make Additional Capital Contributions do not supply all
of the necessary Additional Capital Contributions requested, the Manager in its
discretion may request the Investors or any group thereof or other persons to
fund the shortfall with Additional Capital Contributions or, in certain
circumstances, loans. An Investor who elects not to participate in any
supplemental offering of shares and does not provide Additional Capital
Contributions for such Additional Well Activities will have no interest in such
Additional Well Activities, but will retain his interest in the Projects in
which the Fund has already invested.

Insurance

     The Fund or Manager will seek to obtain hazard, property, general liability
and other insurance in commercially reasonable amounts to cover the Projects, as
well as general liability and similar coverage for the Fund's business
operations. The Manager has obtained what it believes to be adequate insurance
for prior Ridgewood Energy Programs, which insurance will apply to the Fund's
Projects. There can be no assurance, however, that insurance on the Projects or
the Fund will be adequate in scope or amount to protect the Fund from material
losses related to the Projects. In addition, the Manager's past practice has
been to obtain insurance as a package that is intended to cover most, if not
all, of the Ridgewood Energy Programs. While the Manager believes that it has
procured insurance sufficient to insure against most risks, the possibility does
exist that depending on the occurrence, insurance may not be adequate to cover
the entire loss sustained, if any, by the Fund. See Risk Considerations.


                                       13


Operator

     Currently, the Fund anticipates that any Project in which it may invest
will be operated and controlled by an unaffiliated third-party entity acting as
Operator for the Projects. The Operator is responsible for drilling,
administration and production activities for leases jointly owned by Working
Interest owners and acts for the account of all Working Interest owners under
the terms of the applicable Operating Agreements. Typically, Operating
Agreements limit the Operator's liability and provide for circumstances under
which the Working Interest owners may remove an Operator, although the Operator
typically may resign at any time. In certain circumstances, Operators will enter
into agreements with independent third-party subcontractors and suppliers to
provide the various services required for operating leases. The Fund has not
discussed or negotiated with any party to act as Operator of any of the Fund's
Projects.

Salvage Fund

     As to Projects in which the Fund owns a Working Interest, the Fund will
(and may be required by the Operating Agreement to) reserve and set aside each
month in a separate interest-bearing account ("Salvage Fund"), a portion of the
Fund's share of net revenue, if any, that the Fund may receive from the
production and sale of natural gas or oil from each such Project. The purpose of
the Salvage Fund, which is in the nature of a sinking fund, is to provide for
the Fund's proportionate share of the anticipated gross cost net of anticipated
salvage value ("Anticipated Salvage Cost") of dismantling production platforms
and facilities, plugging and abandoning the wells, and removing the platforms,
facilities and wells in respect of each of such Projects after the end of their
useful life, in accordance with applicable federal and state laws and
regulations. There is no assurance that the Salvage Funds will have sufficient
assets to meet these requirements, and any unfunded expenses will be a liability
of the Fund. Any portion of a Salvage Fund that remains after the Fund pays its
share of the actual salvage cost will be distributed to the Shareholders.
Payments to each Salvage Fund will reduce the amount of cash distributions that
may be made to Shareholders by the Fund.

Competition

     Strong competition exists in the acquisition of oil and gas leases and in
all sectors of the oil and gas exploration and production industry. Although the


                                       14


Fund does not compete for the acquisition of working interests from the MMS, it
does compete with other companies for the acquisition of percentage ownership
interests in oil and gas working interests in the secondary market. Many
companies with whom the Fund competes for these working interests tend to be
larger companies that have financial and other resources substantially larger
than those of the Fund.

Regulation

     Oil and gas exploration and development activities are subject to federal,
state and local laws and regulations.

     Regulations governing exploration and development activities require the
Fund's operators to obtain permits to drill wells and to meet bonding and
insurance requirements in order to drill, own or operate wells. In addition, the
location of wells, the method of drilling and casing wells, the restoration of
properties upon which wells are drilled and the plugging and abandoning of wells
are also subject to regulations.

     As mentioned earlier, federal offshore leases are administered by the MMS
pursuant to regulations promulgated under the Outer Continental Shelf Lands Act.
Lessees must obtain MMS approval for exploration, development and production
plans prior to the commencement of offshore operations. In addition, approvals
and permits are required from other agencies such as the U.S. Coast Guard, the
Army Corps of Engineers and the Environmental Protection Agency. The MMS has
promulgated regulations requiring offshore production facilities and pipelines
located on the outer continental shelf to meet stringent engineering and
construction specifications, and has proposed and/or promulgated additional
safety-related regulations concerning the design and operating procedures of
these facilities and pipelines. MMS regulations also restrict the flaring or
venting of oil and gas, and proposed regulations would prohibit the flaring of
liquid hydrocarbons and oil without prior authorization. The MMS has promulgated
regulations governing the plugging and abandonment of wells located offshore and
the installation and removal of all production facilities.

     Moreover, the operator's activities are also subject to numerous laws
relating to environmental protection including, but not limited to, the Federal
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act, the Clean Air Act, and comparable
state and local requirements and the Outer Continental Shelf Lands Act.


                                       15


                                 USE OF PROCEEDS




                                                              Maximum Proceeds*              Minimum Proceeds
                                                                                                
Investment Fee to Manager                                     $  6,750,000     (4.5%)        $   67,500     (4.5%)
Selling Commissions                                             12,000,000     (8%)             120,000     (8%)
Placement Agent Fee                                              1,500,000     (1%)              15,000     (1%)
Organizational, Distribution and Offering Fee (including         5,250,000     (3.5%)            52,500     (3.5%)
legal, accounting, engineering and geologic consulting
fees, printing, filing fees, etc.)
Acquisition of or Participation in Projects and Fund
Operations                                                     124,500,00      (83%)          1,245,000     (83%)
Total Proceeds from Offering **                              $150,000,000      (100%)        $1,500,000     (100%)


* The Manager, on behalf of the Fund, may in its sole discretion expand the
offering up to $200,250,000 or more.
** Regardless of the gross proceeds of the Offering, the percentages associated
with the Investment Fee (4.5%), Selling Commissions (8%), Placement Agent Fee
(1%) and Organizational, Distribution and Offering Fee (3.5%) will remain the
same. The annual Management Fee (2.5%) will be included as a part of Fund
Operations.

     Under the LLC Agreement, the Fund may commence operations with minimum
gross proceeds of $1,500,000 and a maximum of $150,000,000 (or $200,250,000 or
more if the Fund is expanded in the Manager's discretion). After payment of the
Investment Fee, selling commissions, Placement Agent Fee, Organizational,
Distribution and Offering Fee, the Fund will have net funds of a minimum of
$1,245,000 and a maximum of $124,500,000 (or more if the Fund is expanded by the
Manager) available for investment in the Fund's Projects and operations.

                               RISK CONSIDERATIONS

     Investment in natural gas and oil exploration and drilling or in
infrastructure equipment or activities involves substantial risks and potential
conflicts of interest and is suitable only for those persons who meet the
Investor Suitability Standards, have a substantial net worth, have no need for
liquidity from such investment, understand and are prepared to assume the
substantial risks discussed below, and are able to bear the potential loss of
the entire investment. Each prospective Investor should consider carefully the
risk factors attendant to the purchase of Shares, including without limitation,
those discussed below, and each should review the investment with his own legal,
tax and financial advisors.


                                       16


                  GENERAL RISKS RELATED TO NATURAL GAS AND OIL
                EXPLORATION, DRILLING, PIPELINES AND OPERATIONS

The Fund's Drilling Activities May Not Be Productive

     Drilling for natural gas or oil in either shallow water or deepwater
involves numerous risks, including the risk that the well will not have
commercially productive reservoirs. The costs of drilling, completing and
operating wells are often uncertain and drilling operations may be curtailed,
delayed or canceled as a result of a variety of factors, including:

     o    Unexpected drilling conditions;

     o    Pressure or irregularities in formations;

     o    Equipment failures or accidents;

     o    Fires, explosions, blow-outs and surface cratering;

     o    Marine risks such as capsizing, collisions and hurricanes;

     o    Adverse weather conditions; and

     o    Shortages or delays in the delivery of equipment.

     Therefore, drilling activities may not be successful and, if unsuccessful,
could have an adverse effect on future results of the operations and financial
conditions of the Fund. Drilling exploratory natural gas or oil wells is
speculative, may be unprofitable, and may result in the total loss of your
investment. While all drilling, whether developmental or exploratory, involves
these risks, exploratory drilling involves greater risks of dry-holes or failure
to find commercial quantities of natural gas or oil. Therefore, drilling
activities may be unprofitable, not only from non-productive wells, but also
from wells that do not produce natural gas or oil in sufficient quantities or
quality to return a profit on the capital dollars invested.

Reserve Data, Prices and Future Net Revenue Estimates are Uncertain and May be
Wrong

     Estimates of reserves by necessity are projections based on engineering and
geological data, including but not limited to, volumetrics, reservoir size and
characteristics, the projection of future rates of production, and the timing of
future expenditures. The process of estimating reserves requires substantial
evaluation on the part of the petroleum engineers and geologists, resulting in


                                       17


determinations that are not always precise, particularly with respect to new
discoveries. The Fund will review the reserve analysis provided by the
Operators. However, engineers who are not retained by Operators may make
different estimates of reserve quantities and revenues attributable to those
reserves based on the same data. The Manager employs individuals in its Texas
office that can provide significant analysis of the Operator's information.
However, if necessary, Fund may retain such independent engineers to review the
Operator's reserve analysis and/or conduct an independent review. In any event,
future performance that deviates significantly from reserve reports could have a
material adverse effect on the Fund's operations, business and prospects, as
well as on the amounts and carrying values of such reserves.

     In addition, the Fund's revenues, profitability, and cash flow are highly
dependent on the price of either or both natural gas and oil, which is affected
by numerous factors beyond the Fund's control. These prices historically have
been very volatile. There can be no guarantee that prices in the future will be
sufficient to make a profit on the sale of the Fund's natural gas or oil.

Geological information and studies may not be available or fully developed when
the Fund is considering investments nor is the Fund required to provide such
information, when available, to Investors

     The Fund expects to utilize the net proceeds from this Offering for the
acquisition, exploration and development of as yet unidentified Projects. As a
result, prospective Investors may not have an opportunity to evaluate any such
Projects before investing, nor will they participate in the selection of such
Projects after investment in the Fund. In addition, when such geological and
other technical information regarding a Project does become available to the
Fund, neither the Manager nor the Fund is required to (but in its discretion
may) provide such information to Investors. Consequently, prospective Investors
will be relying upon the judgment of the Manager for such investment decisions.

The Success of an Investment in an Infrastructure Project is subject to Risks
Beyond the Fund's Control

     The business of transporting, gathering and processing natural gas or oil
for third parties is subject to substantial risks. The volume of natural gas or
oil involved in these activities depends on the actions of third parties, and is
beyond the Fund's control. Further, the following factors, most of which are


                                       18


beyond the Fund's control, may adversely impact the Fund's ability to maintain
or increase its services and, thereby, its revenues, negotiate or renegotiate
contracts, or to remarket unsubscribed pipeline capacity:

     o    price competition;
     o    drilling activity and supply availability;
     o    changes in regulation and actions of regulatory bodies;
     o    credit risk of customer base;
     o    increased costs of capital; and
     o    natural gas and oil prices.

Operating Risks may cause substantial losses and insurance may not protect the
Fund against all these risks

     Ridgewood Energy carries insurance on all projects owned by Ridgewood
Energy Prior Programs. Ridgewood carries certain deductibles on many policies
that must first be paid before collecting under the policy. In addition, the
Operating Agreement normally requires the Operator to carry insurance to cover
its activities under the Operating Agreement. Nevertheless, risks include:
fires; explosions; blow-outs; uncontrollable flows of gas, formation water or
drilling fluids; natural disasters; pipe or cement failures; casing collapses;
abnormally pressured formations; acts of terrorism; and environmental hazards
such as leaks and pipeline ruptures. Insurance to cover some of these risks may
be prohibitively expensive or unavailable, particularly as to acts of terrorism.

     Offshore operations are subject to a variety of operating risks peculiar to
the marine environment, such as capsizing, collisions and damage or loss from
hurricanes or other adverse weather conditions. These conditions can cause
substantial damage to facilities and interrupt production. As a result, the Fund
could incur substantial liabilities that may not be covered entirely by
insurance that could reduce or eliminate the funds available for exploration and
development programs and acquisitions, or result in loss of its interest in the
Projects.

Additional Government Regulation May Affect the Fund's Operations or the Price
of the Fund's Oil and Gas

     The energy exploration, drilling and development business could be subject
to government regulation under which, among other things, rates of production
from wells may be regulated. Government regulations may also impact the market
for the Fund's natural gas or oil, which could adversely affect the price at
which such gas is sold. Government regulations affecting environmental matters
or offshore drilling and exploration activities could adversely impact the
Fund's activities. Finally, while the gathering and processing activities are


                                       19


generally not subject to rate regulation, under certain circumstances, the FERC
may attempt nevertheless to exercise such jurisdiction. There is no way for the
Fund to predict the nature and extent to which such regulations or other
political activity may affect the Fund's operations.

The Fund Must Rely on Third Parties Over Which it has Minimal or No Control to
Operate its Projects.

     The Fund does not own any drilling equipment nor does it maintain a staff
for on-site operations. Accordingly, it must rely completely upon the Operators
and other third parties over whom the Fund and Manager have little or no control
for drilling and other operations with respect to the Projects in which it
invests. Moreover, the Manager is under no duty to share with Investors
technical information regarding operations and drilling from the Operator. As a
result, Investors are relying exclusively on the Manager to adequately manage
any such relationship with a third party.

The Working Interests in Which the Fund Will Invest are Jointly Owned with Other
Participants, including the Operator, and Decisions about the Project may be
Controlled or Influenced by these Participants

     It is anticipated that the Fund will own Working Interests in the Projects
to be developed with persons unrelated to the Fund and the Manager. The Fund may
own a minority or majority interest in such Working Interest with others.
Regardless of the Fund's percentage ownership in a Working Interest or Project,
the Fund will have the right to make decisions affecting the development of
those Projects. However, important decisions with respect to development
activities, which may be detrimental to the Fund, may be controlled or affected
by the other owners of Working Interests in such Projects. Finally, the Fund
could be held liable for the joint activity obligations or the tort actions of
such other Working Interest owners, and this liability could in turn result in
liability for the Manager.

     If the Fund's co-participants fail to pay their portion of the lease
acquisition, drilling, testing and, if appropriate, completion costs for any
lease, there may be insufficient funds to perform such work. If the Fund as a
joint venturer or as a Working Interest owner does not contribute funds for
additional wells proposed by other participants, the Fund will lose all of its
rights to production from those additional wells. Moreover, while the Fund will
monitor and participate in decisions affecting exploration and development of
the leases or wells in which the Fund acquires a Working Interest or Non-Consent


                                       20


Interest, decisions with respect to lease exploration and development activities
may be controlled by the other participants since the Fund in many cases, but
not all, is expected to own less than a 50% interest in each of such leases or
wells.

     Further, the Fund will not originate and does not expect to operate any of
the leases in which it acquires an interest. For that reason, Investors must not
only bear the risk that the Fund will be able to select suitable Projects, but
also that, once acquired, such Projects will be managed prudently, efficiently
and fairly by their Operators. Furthermore, certain Working Interests in
Projects that may be acquired by the Fund may be subject in some cases to
expenses credited in favor of the persons from whom such leases and Projects
were acquired, which interests and expenses will be in addition to the Manager's
fees and interests described herein.

The Salvage Fund may be Insufficient to Cover Salvage Costs and the Fund may be
Liable for the excess

     As indicated above, the Fund may be required to create a Salvage Fund to
cover certain Anticipated Salvage Costs. There is no assurance that the Salvage
Funds will have sufficient assets to satisfy all such costs and the Fund maybe
liable for its percentage share of unfunded expenses.

Ownership of Federal Leases

     Federal law prohibits, with certain limited exceptions, the holding of
interests in federal oil and natural gas leases by persons who are not citizens,
nationals or permanent residents of the United States or corporate entities that
are not a citizen of any state. Since the Fund intends to acquire interests in
federal leases, each Investor must disclose in the Investor Subscription Booklet
his nationality or, in the case of an entity, the place of incorporation.
Prospective Investors who are not United States citizens or nationals or which
are foreign corporations formed outside the United States must so inform the
Fund when completing their Subscription Documents. The Fund will not accept a
subscription from a non-United States citizen, national, permanent resident or
foreign corporation if by accepting such subscription, as determined by the
Manager in its sole discretion, a risk exists that a federal lease will be
canceled or forfeited or that the Fund will be unable to acquire an interest in
a federal lease or that the Fund will be in violation of federal law.


                                       21


                     PARTICULAR RISKS RELATED TO THE SHARES

The Ability to Transfer Shares is Extremely Limited and Investors Will be
Required to Own the Shares Indefinitely

     Shares in the Fund will be an illiquid investment. There is no market for
the Shares, and, because there will be a limited number of persons who purchase
Shares and significant restrictions on the transferability of such Shares, it is
expected that no public market will develop. Moreover, neither the Manager nor
the Fund will provide any market for the Shares. Investors will generally be
prohibited from selling or transferring their Shares except in the circumstances
permitted under Article 13 of the LLC Agreement, and all such sales or transfers
require the consent of the Fund, which may withhold such consent in its sole
discretion. Accordingly, an Investor will have no assurance that he can
liquidate his investment in the Fund and must be prepared to bear the economic
risk of the investment until the Fund is terminated and dissolved.

     The illiquidity of and other significant risks associated with an
investment in the Fund make the purchase of Shares suitable only for an Investor
who has substantial net worth, who has no need for liquidity with respect to
this investment, who understands the risks involved, who has reviewed this
Memorandum and the Exhibits hereto and the risks involved with his tax, legal
and investment advisors, who can sustain the complete loss of the investment,
and who has adequate means of providing for his current and foreseeable needs
and contingencies.

Investors Will not be able to Participate in the Management of the Fund and Must
Rely Exclusively on the Manager

     Investors will not have the right, power or authority to participate in the
ordinary and routine management of the Fund or the Projects or to exercise
control over the decisions of the Fund. Under the LLC Agreement, the Manager is
granted the exclusive right to manage, control and operate the affairs and
business of the Fund and to make all decisions relating thereto and will have
full, complete and exclusive discretion with respect to all such matters.
Accordingly, no prospective Investor should purchase any Shares unless the
prospective Investor is willing to entrust all aspects of management of the Fund
to the Manager.


                                       22


There will be Limited Ability to Sell or Transfer Fund Assets such that the Fund
will be Required to Own Under Performing Assets Indefinitely

     The Fund's interests in the Projects will be illiquid. The Fund does not
anticipate selling its interests, or any part thereof, in the Projects. However,
if the Fund were to attempt to sell any such interest, a successful sale would
depend upon, among other things, the operating history and prospects for the
well or interest therein being sold, proven natural gas or oil reserves, the
number of potential purchasers and the economics of any bids made by them and
the current economics of the natural gas or oil market. In addition, any such
sale may result in adverse tax consequences to the Fund and Investors.

     The Manager will have full discretion to determine whether any Project, or
any interest therein, should be sold and the Fund will have no obligation to
sell all or a portion of it, or retain it, for the benefit of Investors.
Investors may be required to remain in the Fund until it is terminated and
dissolved.

The Manager's Liability to the Fund May be Limited

     The LLC Agreement, which is controlled by Delaware law, provides that the
Fund's officers and agents, the Manager, the affiliates of the Manager, and
their respective directors, officers and agents when acting for the Manager or
their affiliates on behalf of the Fund, (collectively, "Ridgewood Managing
Persons") will be indemnified and held harmless by the Fund from any and all
claims arising out of their management of the Fund, except for claims arising
out of the bad faith, gross negligence or willful misconduct of such persons.
Therefore, an Investor may have difficulty sustaining an action against any of
the Ridgewood Managing Persons based on breach of its or his fiduciary
responsibility or other obligations to the Fund. See Fiduciary Responsibilities
of Manager - Indemnification and LLC Agreement - Exhibit A.

There May Be Limited Ability to Spread Risk

     Because the Escrow Amount is $1,500,000, the Fund could be formed and
conduct operations upon receipt of $1,500,000 in Capital Contributions from
Investors. To the extent that the Fund does not receive substantial capital
contributions once it begins operations, its ability to spread risks over a
larger number of investments in Projects will be reduced.


                                       23


The Manager Will Receive an Annual Management Fee Regardless of Profitability

     The Manager and its Affiliates will receive fees and compensation
throughout the life of the Fund. Inherent in the fee and compensation
arrangements are the possibility of conflicts between the best interests of the
Investors and the best interests of the Manager. The Manager may have incentives
to act in its best interests rather than in the best interest of the Investors.
See Compensation; Conflicts of Interest.

Expansion of the Fund may be Dilutive

     The Manager, on behalf of the Fund, in its discretion, may increase the
maximum proceeds of this Offering from $150,000,000 to $200,250,000 or more. If
the Fund were so increased, it could dilute the investment made by Investors
prior to such expansion. However, such expansion would result in increased
capital, enabling the Fund to invest in additional Projects and add
diversification to the Fund's portfolio of Projects.

Compensation of Manager and Affiliates Not Linked to Profitability

     Pursuant to the LLC Agreement, the Manager will receive certain fees and
reimbursement of expenses. The fees payable under the LLC Agreement may be
substantial and are payable whether or not the Fund operates at a profit. None
of the compensation to be received by the Manager was derived as a result of
arm's length negotiations.

Modification of Delaware Law

     The LLC Agreement contains certain provisions that modify what would
otherwise be the applicable Delaware law relating to the fiduciary standards of
the Manager to the Investors. The fiduciary standards in the LLC Agreement could
be less advantageous to the Investors and more advantageous to the Manager than
the corresponding fiduciary standards otherwise applicable under Delaware law.

In accordance with Delaware Law, the LLC Agreement Limits Investor Access to
Certain Information

     Delaware law permits Delaware limited liability companies to restrict
access to certain information provided that such restricted access is set forth
in the limited liability agreement. The Fund's LLC Agreement contains provisions
that do limit Investors' access to certain sensitive or confidential
information. Therefore, Investors may not have the ability to obtain certain
information from the Fund. See, Limitations on Investor's Information Rights;
LLC Agreement.


                                       24


Limited Liability of Investors

     The Fund will be governed by the LLC Act under which, as a general rule, an
Investor's liability for the obligations of the Fund is limited to such
Investor's Capital Contribution and such Investor's share of the Fund's assets.
An Investor of the Fund will not otherwise be liable for the obligations of the
Fund. Should an Investor participate in the management of the business of the
Fund, in such case, the Investor may be liable to the Fund or other Investors
for conduct that constitutes bad faith, gross negligence or willful misconduct.
In addition, Investors should be aware that they potentially could be liable to
return distributions made by the Fund if within a certain period of time after
such distributions were made the Fund becomes insolvent.

The Fund has not yet Finally and Conclusively Selected or Identified Projects

     The Fund expects to utilize the net proceeds from this Offering for the
acquisition, exploration and development of as yet unidentified Projects. As a
result, prospective Investors may not have an opportunity to evaluate any such
Projects before investing, nor will they have a voice in the selection of such
Projects after investment in the Fund. Consequently, prospective Investors will
be relying upon the judgment of the Manager for such decisions.

The Amount and Frequency of Cash Distributions Depends on the Fund's Operations
and Need for Cash Reserves and is Uncertain

     No distributions will be made from the Fund to the Investors of the Fund
until the Fund has funds that the Manager determines are not needed for the
operation of the Fund. Accordingly, there is no assurance that any distributions
from the Fund will be made to its Investors. Distributions will depend primarily
on the Fund's net cash receipts from its operations. Moreover, distributions
could be delayed to repay the principal and interest of Fund borrowings, if any,
or to fund Fund costs. Fund income will be taxable to the Investors in the year
earned, even if cash is not distributed.

The Manager will not be Making a Capital Contribution but Will Receive
Distributions

     While the Manager (in its capacity as such) generally will receive 15% of
distributions of the Fund, it will not contribute any cash to the Fund with


                                       25


respect to its interests as Manager (except to the extent that Fund
Organizational, Distribution and Offering Expenses might exceed the
Organizational, Distribution and Offering Fee). Accordingly, the Investors are
expected to contribute substantially all of the funds actually utilized for Fund
activities. If the entire venture is unsuccessful, the Investors will bear 100%
of the loss (except to the extent that the Manager purchases Shares for its own
account). See Terms of Offering.

Risks of Potential Conflicts of Interest

     There are potential conflicts of interest involved in the operation of the
Fund. Some examples of these potential conflicts include without limitation:

     o    competing demands for management resources of the Manager among the
          prior Ridgewood Energy Programs;
     o    conflicts between the interests of the Manager and its Affiliates in
          receiving compensation from the Fund for investment activities,
          operating activities, and divestitures, as well as reimbursement for
          expenses, and the interests of the Investors;
     o    conflicts relating to the allocation of costs and expenses among the
          Fund and prior Ridgewood Energy Programs;
     o    conflicts arising from the fact that the Manager will not make a
          capital contribution in respect of its interest as such in the Fund,
          and that the Investors will supply all of the capital of the Fund;
     o    conflicts as to who will supply additional capital in the event the
          Fund were to require additional contributions; and
     o    the lack of independent representation of Investors in structuring
          this offering and in determining compensation.
See Conflicts of Interest

TAX RISKS

     The Fund is organized as a Delaware limited liability company and the
Manager intends to operate the Fund such that it will qualify as a partnership
for federal tax purposes. The principal tax risks to the Investors are that: (A)
the Fund may recognize income taxable to the Investors but may not distribute
enough cash to cover the Investors' income tax on their shares of the Fund's
taxable income; (B) the allocation of Fund items of income, gain, loss, and
deduction in the LLC Agreement may not be respected for federal income tax
purposes; (C) all or a portion of the Fund's expenses could be considered either
investment expenses (which would be deductible by an Investor only to the extent
the aggregate of such expenses exceeded 2% of such Investor's adjusted gross
income) or as nondeductible items that must be capitalized; (D) all or a


                                       26


substantial portion of the Fund's income will be deemed to constitute unrelated
business taxable income, consequently tax-exempt Investors will be subject to
tax on their respective portions of such income; (E) a charitable remainder
trust that is an Investor could have all of its income from any source deemed to
be taxable; (F) all or a portion of the losses, if any, allocated to the
Investors will be "passive losses" and thus deductible by the Investor only to
the extent of passive income; and (G) the Investors could have capital losses in
excess of the amount that is allowable as a deduction in a particular year.

     Although the Fund has obtained an opinion of counsel regarding the matters
described in the preceding paragraph, the Fund will not obtain a ruling from the
Internal Revenue Service (the "Service") as to any aspect of its tax status. See
Tax Aspects. The tax consequences of investing in the Fund could be altered at
any time by legislative, judicial, or administrative action. Prospective
Investors are urged to consult their own tax advisors prior to investing in the
Fund.

     The Service may audit the Fund's tax returns. Any audit issues will be
determined at the Fund level. If adjustments are made by the Service,
corresponding adjustments will be required to be made to the federal income tax
returns of the Investors, which may require payment of additional taxes,
interest, and penalties. Audit of a Fund return may result in examination and
audit of an Investor's return that otherwise might not have occurred, and such
audit may result in adjustments to items in the Investor's return that are
unrelated to the Fund. Each Investor must bear the expenses associated with an
audit of that Investor's return.

     In the event that an audit of the Fund by the Service results in
adjustments to the tax liability of an Investor, such Investor will be subject
to interest on the underpayment and may be subject to substantial penalties. The
statutory rate of interest on deficiencies is presently 7% per annum compounded
daily. In addition, a number of substantial penalties could potentially be
asserted by the Service on any such deficiencies.

     Significant and fundamental changes in the nation's federal income tax laws
have been made in recent years and additional changes are likely. Any such
change may affect the Fund and the Investors. Moreover, judicial decisions,
regulations or administrative pronouncements could unfavorably affect the tax
consequences of an investment in the Fund. See Tax Aspects for a more in depth
explanation of the tax implications of investing in the Fund.


                                       27


                              TERMS OF THE OFFERING

General Offering Terms

     The Offering consists of a minimum of 10 Investor Shares (representing
Capital Contributions of $1,500,000) and a maximum of 1,000 Investor Shares
(representing Capital Contributions of $150,000,000) of beneficial interest in
the Fund that are offered at $150,000 per Share. Fractional Investor Shares are
available for purchase. The Fund may in its sole discretion expand the maximum
offering to 1,335 Investor Shares or more (representing Capital Contributions of
$200,250,000 or more) prior to the Termination Date in the event that it
determines that additional capital is required. The price for each Investor
Share is payable all in cash at the time the prospective Investor delivers a
completed and executed Subscription Agreement to the Fund, unless the Fund
decides otherwise in its sole discretion.

     All proceeds from the sale of Investor Shares must be deposited in a
separate segregated interest-bearing escrow account at North Fork Bank until the
Escrow Date, which is the date on which the Fund accepts Investor subscriptions
of at least $1,500,000 in the aggregate. The account will be held in the name of
"Ridgewood Energy S Fund LLC - Share Escrow Account" and until the escrow
conditions are fulfilled the Fund will not invest any funds, no fees applicable
to those subscriptions will be paid from the escrow account and interest on the
escrowed funds will be held in the escrow account. If 10 Investor Shares are not
subscribed and paid for in collected funds by the close of business on July 31,
2006, the Fund will terminate and the Investors' Capital Contributions, together
with any interest thereon, will be returned by the escrow agent promptly to the
Investors. If the escrow conditions are fulfilled no later than July 31, 2006,
the Fund's proceeds, net of fees described below, will be maintained thereafter
in the name of the Fund, in one or more separate, segregated accounts at
commercial banks chosen by the Manager.

     Funds released from the escrow account will be used to pay the Investment
Fee, Organizational, Distribution and Offering Fee, selling commissions and
Placement Agent Fee due at that time. Subsequent receipts from this offering
will be applied in the same manner when deposited. After payment of these fees,
the remaining funds will be used to develop the Fund's Projects.

     The termination date of this Offering of Investor Shares will be July 31,
2006 (the "Termination Date"). The Fund may in its sole discretion terminate the
initial offering of Investor Shares at any time before the Termination Date or
extend the scheduled Termination Date to any date or from date to date but in no
event beyond 90 days after the Termination Date.


                                       28


     The Offering may be withdrawn by the Fund in its discretion and for any
reason at any time prior to the Termination Date as set by it. If the Offering
is withdrawn prior to satisfaction of the escrow conditions, then all cash
received from subscriptions will be returned promptly to the respective
subscribers, together with any interest earned on such amount. If the Offering
is withdrawn after the escrow conditions have been satisfied but prior to the
Termination Date, then all cash received from subscriptions, net of third party
fees, will be returned promptly to the respective subscribers, together with any
interest earned on such amount. For purposes of this provision, third party fees
shall not include those fees paid to the Manager or its affiliates.

     Prospective qualified Investors may subscribe for the purchase of Investor
Shares in the Fund by completing and executing in full all of the appropriate
documents contained in the Investor Subscription Booklet (separately bound as
Exhibit D) and delivering such documents, together with the purchase price, to
the Fund, which includes the Investor Subscription Agreement. The Investor
Subscription Agreement contains representations to be made by prospective
Investors, the violation of which may entitle the Fund, the Manager and others
to indemnification for any losses resulting therefrom.

                              PLAN OF DISTRIBUTION

     The Investor Shares will be offered on a "best-efforts" basis through
Ridgewood Securities Corporation (the "Placement Agent"), which is a registered
broker-dealer and a member of the National Association of Securities Dealers,
Inc. ("NASD"), and by other registered broker-dealers who may also serve as
purchaser representatives in connection with this offering. Robert E. Swanson,
the President and controlling member of the Manager and the President of the
Fund, is the President, registered principal and sole stockholder of the
Placement Agent. Selling commissions equal to 8% of the gross proceeds from the
sale of Investor Shares will be paid to the Placement Agent and to other
participating broker-dealers, as the case may be, and the Placement Agent will
be paid an amount equal to 1% of the aggregate Capital Contributions for serving
as placement agent (the "Placement Agent Fee"). See LLC Agreement - Exhibit A.
Payment of the selling commission and Placement Agent Fee will be due and
payable promptly after the latest to occur of (1) acceptance by the Fund of an
Investor's subscription, (2) the Escrow Date or (3) the receipt and collection
by the Fund of the gross purchase price for the Investor Shares in question. A


                                       29


similar selling commission and Placement Agent Fee will be paid with respect to
any sales of additional Investor Shares. By executing and delivering the
Subscription Agreement to the Fund, each Investor will be deemed to have
consented to the arrangements between the Fund and the Placement Agent as
described in this Memorandum.

     The Manager will coordinate the offering of the Investor Shares, will
prepare promotional materials and will provide support to cooperating
broker-dealers who participate in the offering. The Manager is also responsible
for review of Investor subscriptions, approval of subscriptions and Investor
relations during the offering.

     The Fund reserves the right to waive the payment of all or a portion of a
selling commission or the Placement Agent Fee by any Investor, in which case the
cost of the Fund interest to any such Investor will be less than the cost of an
equivalent Fund interest to an Investor paying a full commission and Placement
Agent Fee. The Fund contemplates that it will exercise these rights, without
limitation, in respect of Investors who make Capital Contributions of $1,050,000
(7 Investor Shares) or more by waiving payment of all or a portion of the
selling commission and Placement Agent Fee and by modifying the Managing
Shareholder's compensation as described below.

     To the extent permitted by law, the Placement Agent is to be indemnified by
the Fund against any liability based upon the assertion that it has no
obligation to the Fund or Shareholders to monitor Fund operations or to report
to Investors.

                       PARTICIPATION IN COSTS AND REVENUES

     The Fund's investment objective is primarily to generate current cash flow
for distribution to Investors from the operation of the Fund Projects to the
extent that such distributions are consistent with the reserve requirements and
operational needs of those Projects. If the Fund does make distributions, this
section describes how the Fund will:

               o    determine what cash flow will be available for distributions
                    to Investors,
               o    distribute available cash flow,
               o    give the Manager a share of cash flow, if available,
               o    handle returns of Capital Contributions,
               o    allocate income and deductions for tax purposes, and
               o    maintain capital accounts for Investors.


                                       30


     "Available Cash" determines what amounts in cash the Fund will be able to
distribute in cash to Investors.

     There are three types of Available Cash:

     "Available Cash From Capital Transactions" is total cash received by the
Fund from the proceeds of the sale or other disposition of the Fund's Property
(including items such as insurance proceeds, refinancing proceeds, condemnation
proceeds and other amounts received out of the ordinary course of business), but
excluding dispositions of temporary investments of the Fund.

     "Available Cash From Temporary Investments" is cash from Temporary
Investments, as defined in the LLC Agreement.

     "Available Cash From Operations" is all other Available Cash.

     The terms "Available Cash from Capital Transactions", "Available Cash from
Operations", Available Cash from Temporary Investments", "Capital Transactions,
and "Temporary Investments" are defined in the LLC Agreement and are not defined
by and are not the same as similar concepts under generally accepted accounting
principles.

     There is no fixed requirement to distribute Available Cash; instead, it
will be distributed to Shareholders to the extent and at such times as the Fund
believes is advisable. Once the amount and timing of a distribution is
determined, it shall be made to Investors as described below.

Distributions From Operations

     At various times during a calendar year, the Fund will determine whether
there is enough Available Cash From Operations for a distribution to
Shareholders. The amount of Available Cash From Operations determined to be
available, if any, excluding any amounts distributable as an Early Investment
Incentive, will be distributed to the Shareholders. At all times, the Manager
will be entitled to 15% and Investors will be entitled to 85% of the Available
Cash from Operations distributed (other than distributions attributable to the
Early Investment Incentive).

Distributions of Available Cash From Capital Transactions

     Available Cash From Capital Transactions that the Fund decides to
distribute will be paid as follows:


                                       31


               o    Before Investors have received total distributions
                    (including distributions from Available Cash From Operations
                    and Available Cash From Capital Transactions, but excluding
                    distributions attributable to the Early Investment Incentive
                    and distributions of Available Cash from Temporary
                    Investments) equal to their Capital Contributions, 99% of
                    Available Cash From Capital Transactions will be distributed
                    to Investors and 1% to the Manager.

               o    After Investors have received total distributions (including
                    Available Cash From Operations and Available Cash From
                    Capital transactions, but excluding distributions
                    attributable to the Early Investment Incentive and
                    distributions of Available Cash from Temporary Investments)
                    equal to their Capital Contributions, 85% of Available Cash
                    From Capital Transactions will be distributed to Investors
                    and 15% to the Manager.

General Distribution Provisions

     After payment of the Early Investment Incentive, distributions to Investors
under the foregoing provisions will be apportioned among them in proportion to
their ownership of Investor Shares. The Manager has the sole discretion to
determine the amount and frequency of any distributions; provided, however, that
a distribution may not be made selectively to one Shareholder or group of
Shareholders but must be made ratably to all Shareholders entitled to that type
of distribution at that time. The Manager in its discretion nevertheless may
credit select persons with a portion of its compensation from the Fund or
distributions otherwise payable to the Manager.

     Because distributions, if any, will be dependent upon the earnings and
financial condition of the Fund, its anticipated obligations, the Manager's
discretion and other factors, there can be no assurance as to the frequency or
amounts of any distributions that the Fund may make.

Return of Capital Contributions

     If the Fund for any reason at any time does not find it necessary or
appropriate to retain or expend all Capital Contributions, in its sole
discretion it may return any or all of such excess Capital Contributions ratably
to Investors. A return of Capital Contributions is not treated as a
distribution. The Fund and the Manager will not be required to return any fees
deducted from the original Capital Contribution or any costs and expenses
incurred and paid by the Fund. The Investors will be notified of the source of
the payment. Any such return of capital will decrease the Investors' Capital
Contributions.


                                       32


Capital Accounts and Allocations

     The tax consequences of an investment in the Fund to a Shareholder in the
event of dissolution depend on the Shareholder's capital account and on the
allocations of profits and losses to that account. The Fund's taxable profits or
losses are allocated among the Shareholders as described below and profits or
losses are added to or subtracted from the Shareholders' capital accounts. The
amounts allocated to each Shareholder will generally not be equal to the
distributions the Shareholder receives until final liquidating distributions are
made to Shareholders.

     Each Shareholder will have a capital account, which will have an initial
balance equal to the Shareholder's Capital Contribution. Capital accounts will
be adjusted in accordance with Regulations under Code Section 704. The capital
account balance will be increased by any additional Capital Contributions by the
Shareholder and by profits allocated to the Shareholder; it will be decreased by
the amount of distributions to the Shareholder, returns of capital and by losses
allocated to the Shareholder. Contributions of property by a Shareholder, if
any, or distributions of property to a Shareholder, if any, are valued at fair
market value, net of liabilities. The Fund does not currently anticipate that
any contributions or distributions of property will be made. Certain additional
adjustments to capital accounts will be made if necessary to account for the
effects of non-recourse debt incurred by the Fund, if any, or contributions of
property, if any, to the Fund. See Tax Aspects - Allocations.

     For any year, profits and losses are allocated in accordance with Articles
4 and 7 of the LLC Agreement. In general, profits and losses in any year are
allocated 85% to Investors and 15% to the Manager. The primary exception to this
treatment is that all items of expense, loss, deduction and credit attributable
to Capital Transactions (notably intangible drilling expense) are allocated 99%
to Investors and 1% to the Manager.

                                  COMPENSATION

     The following table sets forth the types of fees the Manager, Affiliates
and certain consultants or independent third parties may receive in connection
with the Offering and operation of the Fund. These fees were not determined
through arms-length negotiations.


                                       33





- ----------------------------------------------------------------------------------------------------------------------
                                                    OFFERING STAGE
======================================================================================================================

======================================================================================================================
                                                         
Selling Commissions          Ridgewood Securities, an          $12,000 per full Investor Share (8%), which will be
                             affiliate of the Manager or       reallowed to participating broker-dealers.
                             participating broker-dealers
======================================================================================================================
Placement Agent Fee          Ridgewood Securities, an          $1,500 per full Investor Share (1%).
                             affiliate of the Manager
======================================================================================================================
Investment Fee               Manager                           $6,750 per full Investor Share (4.5%), which is
                                                               for the Manager's services in investigating and
                                                               evaluating the Projects for investing the capital
                                                               contributed to the Fund.
======================================================================================================================
Organizational,              Manager                           $5,250 per full Investor Share (3.5%), which is
Distribution and Offering                                      intended to pay legal, organizational and other
Fee                                                            expenses of offering the Fund.
- ----------------------------------------------------------------------------------------------------------------------
                                                   OPERATING STAGE
======================================================================================================================
Management Fee               Manager                           The annual management fee is 2.5% of the total
                                                               Capital Contributions ($3,750 per full Investor
                                                               Share).
======================================================================================================================
Distributive Share           Manager                           See Participation in Costs and Revenues.
                                                               Generally 15% of distributions.
- ----------------------------------------------------------------------------------------------------------------------


     With respect to selling commissions, Ridgewood Securities, an affiliate of
the Manager, may pay additional compensation out of its own funds to certain
registered broker-dealers that undertake to perform additional due diligence and
other services, including a portion of its net revenues attributable to its
interests in the Fund or fees payable to it by the Fund. The Manager reserves
the right to pay similar additional compensation from its own funds to
broker-dealers that provide services and otherwise assist in the sale of
Investor Shares. In addition, Ridgewood Energy, in its sole discretion, may pay
over to certain Investors a portion of distributions or fees from the Fund
otherwise payable to Ridgewood Energy.

     In addition to the Management Fee set forth above, the Manager will be
entitled to reimbursement from the Fund for all actual and necessary direct
expenses paid or incurred in connection with the operation of the Fund to the
extent that those expenses were incurred by the Manager in carrying out the
responsibilities assigned to it by the LLC Agreement, do not constitute
organizational, distribution and offering expenses and do not constitute
expenses defrayed from the Management Fee. Finally, the Manager may be entitled
to reimbursement from the Fund for direct expenses actually incurred for
operational or project development services it provides to a Project to the
extent that such charges do not exceed amounts that would be charged by
unrelated third parties and the Project itself does not reimburse such direct
expenses.


                                       34


                    FIDUCIARY RESPONSIBILITIES OF THE MANAGER

     The Manager is not liable to persons other than the Fund or the Investors
for any obligation of the Fund. The Investors and the Fund may have a number of
legal remedies against the Manager in the event it was to breach its duties.
Under the laws of Delaware, the Manager is accountable as a fiduciary and must
exercise good faith in handling Fund affairs. In managing the Fund, it is likely
that the Manager would be entitled to the benefits of the "business judgment
rule" of Delaware law that provides that the courts will not hold the Manager
liable for its negligence or mistaken decisions in the absence of bad faith or
willful misconduct

     Limitations on Investors' Information Rights. Under Delaware law, Delaware
limited liability companies such as the Fund are permitted to restrict
Investors' rights to demand certain information from the Fund. The restrictions
need not be reasonable if they are either included in the limited liability
company's original organizing agreement or are unanimously adopted by all
members of the company thereafter. The Fund has included the restrictions
described below in the LLC Agreement. By subscribing to purchase Investor
Shares, each Investor agrees to all provisions of the LLC Agreement, including
without limitation the following:

     o    No Investor or other person acting in the right of or for the benefit
          of an Investor is entitled to receive from the Fund or its management
          any information concerning any other Investor or offeree of the Fund's
          securities, without the prior written consent of the other Investor or
          offeree.

     o    The Fund may withhold, redact ("white-out" or obliterate) or summarize
          other types of information so as to prevent Investor information from
          being disclosed in violation of the paragraph immediately above. For
          example, the Fund's tax returns may be redacted to eliminate the names
          and addresses of other Investors and information concerning them.

     o    Each Investor is entitled to obtain the following information from the
          Fund upon reasonable written demand stating the purpose of the demand
          (which must be reasonably related to the Investor's interest in the
          Fund):


                                       35


          o    true and full information regarding the Fund's business and
               financial condition and the contributions (but not the
               contributors) to the Fund;
          o    copies of the Fund's tax returns redacted to eliminate Investor
               information, the LLC Agreement and material agreements between
               the Fund and the Manager or other relevant Ridgewood Programs;
               and
          o    other reasonable information regarding the Fund.

     o    Investors are not entitled to agreements, technical information, trade
          secrets and other confidential information relating to the Fund's
          investments.

     o    The LLC Agreement sets out all rights that Investors have to demand or
          receive information from the Fund, except as provided by the federal
          securities laws or other laws that are not superseded by the LLC
          Agreement.

     o    The Fund may establish reasonable standards and limitations on
          disclosures of information and costs of providing that information
          will be borne by the requesting Investor.

     o    Providing information to one Investor or to persons outside a Fund
          does not act as a waiver of the Fund's rights to withhold information
          to another Investor.

     Indemnification. The LLC Agreement provides that neither the Manager nor
any of its Affiliates will be liable, responsible, or accountable in damages or
otherwise to the Fund or any Investor for any loss or damage incurred by reason
of any act performed by or omission of the Manager or such Affiliates in the
furtherance of the interests of the Fund and within the scope of the authority
granted to the indemnified person by the LLC Agreement or by the Investors,
provided that such acts of the indemnified person did not constitute willful
misconduct, bad faith, gross negligence or any other material breach of
fiduciary duty with respect to such acts or omissions. The Fund, out of its
assets and not out of the assets of the Manager or other persons, will, to the
full extent permitted by law, indemnify and hold harmless the Manager and any of
its Affiliates who were or are parties or are threatened to be made parties to
any threatened, pending, or completed action, suit, or proceeding by reason of
any acts, omissions, or alleged acts or omissions arising out of such person's
activities as a Manager, or as an Affiliate of such Manager, if such activities
were performed in good faith in furtherance of the interests of the Fund and
were within the scope of the authority conferred to such person by the LLC
Agreement or by the Investors against losses, damages, or expenses for which


                                       36


such person has not otherwise been reimbursed, provided that the acts of such
person did not constitute willful misconduct, recklessness, bad faith, gross
negligence or any other material breach of fiduciary duty with respect to such
acts or omissions.

     Expenses of defense or settlement may be advanced to a person who may be
entitled to indemnification in advance of a determination that indemnification
will be provided, if that person undertakes to repay the advance if it is
ultimately determined that such person was not entitled to indemnification and
if, in the Manager's discretion, it is reasonable to do so. A successful claim
for indemnification would reduce the assets of the Fund. Provisions reducing the
liability or providing for indemnification of the Manager and its Affiliates may
have the effect of encouraging less prudent decisions because of the decreased
likelihood of being held accountable and may serve to deter derivative actions
against them even though such actions if successful might benefit the Fund.

     The Investor Subscription Booklet contains representations that will be
made by prospective Investors as to their financial condition, the suitability
of their investments in the Fund, their receipt and understanding of the
Offering materials and compliance with applicable securities laws. If these
representations are untrue, the Investor making them will be obligated to
indemnify the Fund, the Manager and others involved in the Offering of Investor
Shares for any losses resulting therefrom.

     The Manager has obtained limited directors' and officers' liability
insurance and other liability insurance on behalf of the Manager, its
principals, and the Fund. Substantially all of the premiums for this insurance
will be paid by the Fund and the other programs sponsored by the Manager or its
Affiliates.

     Other Matters. The Manager is not required to take action on behalf of a
Fund unless such Fund has sufficient funds to meet obligations that might arise
from that action. The Manager is not required to advance or expend its own funds
for ordinary Fund business but is entitled to reimbursement from the Fund if the
Manager does so consistent with the LLC Agreement. The Manager is not required
to devote its time exclusively to the Fund and may engage in any other venture.

     The Fund and its Affiliates are permitted to vote any Investor Shares they
own on matters on which the Investors may vote. In cases where the Manager or
its Affiliates or employees have an interest in the matter being voted on, the
effect of their voting Investor Shares owned by them will be determined by


                                       37


principles of Delaware law applicable to directors, officers and stockholders of
Delaware corporations. In general, this law would permit and recognize the
voting of those Shares. In a court proceeding challenging the validity of the
action taken under that vote, the burden of proof would vary depending on the
vote of "uninterested stockholders." If a majority of the Shares voted by
persons having no special interest in the transaction are voted in favor of the
action, the burden of providing that the action was unfair to a Fund would be
borne by the persons challenging the action. If, in contrast, the persons having
no special interest in the action do not vote a majority of the Shares in favor,
the interested Manager or other persons would have the burden of convincing the
court that the action was fair to the Fund.

                              CONFLICTS OF INTEREST

     The Investors will not be involved in the day-to-day operations of the
Fund. Accordingly, the Investors must rely on the Manager's judgment in such
matters. Inherent with the exercise of its judgment, the Manager will be faced
with conflicts of interest which are described in the LLC Agreement, but include
without limitation:

     o    The participation by the Manager and its Affiliates in natural gas and
          oil exploration and production activities on behalf of the prior
          Ridgewood Energy Programs ("Prior Programs"), the effect of which is
          that the Manager owes a duty of good faith to the programs which it
          manages and actions taken with regard such Prior Programs may not be
          advantageous to the Fund.

     o    The Manager or its Affiliates may provide services to the Fund. The
          Manager and such affiliates will be compensated for such services at
          rates competitive with the rates charged by unaffiliated persons for
          similar services.

     o    If additional wells are proposed in Projects in which the Fund has
          acquired either Working Interests or Non-Consent Interests, a conflict
          of interest could result between the Fund and a subsequent program as
          to whether the Fund or that program should be entitled to participate
          in the additional wells. The Manager, in its discretion, may first
          allocate the opportunity to the Fund, if it has uninvested proceeds of
          this Offering, and then will consider whether to solicit voluntary
          additional capital contributions from the investors in a prior
          Ridgewood Energy Program, in the Fund, or both. If the Manager does
          not solicit voluntary additional capital contributions, it may
          organize another investment program to acquire the resulting Working
          Interests or Non-Consent Interests. All these entities would have


                                       38


          conflicting interests. Moreover, should the Manager elect to solicit
          voluntary additional capital contributions from existing Investors,
          the rights of Investors who participate and the terms upon which they
          participate could conflict with the terms of this Offering and with
          Investors of the Fund who elect to not participate in any subsequent
          offering.

     o    Any ownership interests in the Fund by the Manager or its Affiliates
          may have the effect of diluting the voting power of the other
          Investors in the Fund.

     o    The Manager and its Affiliates are currently and may in the future act
          as managers, sponsors or participants in other investment ventures
          similar to the Fund or with similar objectives, or in differing
          industries. These may create conflicting demands on the time and
          resources of the Manager and its Affiliates or create conflicting
          duties to the other ventures and the Fund.

     o    The rights to wells on locations in which the Fund may invest may be
          on locations adjacent to wells and leases owned by the prior Ridgewood
          Energy Programs. While the proposed wells are not to be drilled for
          the purpose of proving or disproving the existence of gas on any
          adjacent acreage, such drilling activities may incidentally develop
          information valuable to one or more prior Ridgewood Energy Programs,
          the Manager or its Affiliates in evaluating their nearby acreage at no
          cost to them. In addition, the Fund could make an investment in a well
          or infrastructure that could potentially enhance the value of an
          investment made by a prior Ridgewood Energy Program. Accordingly, a
          conflict of interest will exist between the interest of the Fund and
          the interest of a prior Ridgewood Energy Program, the Manager or its
          Affiliates in selecting the location and type of operations in which
          the Fund will participate. There can be no assurance that transactions
          between the Fund and its Affiliates, if any, will be on terms as
          favorable as could have been negotiated with unaffiliated third
          parties.

     o    Other interests of Operators or participants in leases or their
          Affiliates may also be in conflict with those of the Fund. The Fund
          will enter into Operating Agreements with participants in respect of
          the Projects in which the Fund invests. Participants in those leases
          may engage in oil and natural gas lease acquisition, exploration, and
          production activities that may compete with the Fund.

     o    The Manager is authorized under the LLC Agreement to make subjective
          determinations of the value of the Fund's assets. Such valuation could
          impact or influence the performance record of the Fund.


                                       39



     o    The Fund has provided no independent representation of prospective
          Investors in connection with this Offering, and each prospective
          Investor should seek independent advice and counsel before making an
          investment in the Fund.

     o    The Fund may acquire a "Non-Consent Interest" in a particular well
          from certain Working Interest owners, including possibly, those owned
          by Affiliates. Ultimately, Non-Consent Interests revert back to the
          original Working Interest owner upon the recoupment by the
          participating parties of a penalty amount from the production
          attributable to the non-consent interest. As a result, the Manager
          could possibly devote more management time to Working Interests of the
          Fund or other Ridgewood Energy Programs that do not revert to a
          third-party.

     o    In addition to any government royalties, the Fund may invest in a well
          that may also require payment of royalties to certain other entities,
          including, possibly, affiliates of the Fund, who posses an "overriding
          interest" in such well. Payment of royalties to owners of any such
          overriding interest may reduce the gross revenue to the Fund from such
          well.

     o    The Manager has complete discretion with respect to whether and when
          to make distributions and the amount thereof. No distributions will be
          made from the Fund to the Investors of the Fund until the Fund has
          funds that the Manager determines are not needed for the operation of
          the Fund. Accordingly, there is no assurance that any distributions
          from the Fund will be made to its Investors. Distributions will depend
          primarily on the Fund's net cash receipts from its operations.
          Moreover, distributions could be delayed to repay the principal and
          interest of Fund borrowings, if any, or to fund Fund costs. Fund
          income will be taxable to the Investors in the year earned, even if
          cash is not distributed. The timing and amount of distributions, if
          any, will also impact upon the Manager's entitlement to distributions.

     o    Finally, pursuant to the LLC Agreement, the Manager acts as the "tax
          matters partner" and, accordingly will be making determinations for
          the Fund regarding taxes that may impact the Manager differently than
          the Investors.


                                       40


     One factor that reduces conflicts of interest is that the Manager receives
the same fees from every Fund. Therefore, there is no financial incentive to
favor one Fund over another. The Manager and its Affiliates will attempt, in
good faith, to resolve all conflicts of interest in a fair and equitable manner
with respect to all persons affected by those conflicts of interest. Prospective
investors should be aware that the Manager and its Affiliates have not formally
adopted procedures or criteria to avoid or to resolve all conflicts of interest
that may arise between the Manager, its Affiliates, prior Ridgewood Energy
Programs, and the Fund. Under the LLC Agreement, in resolving any conflict of
interest that may arise, the Manager is not liable to Investors for such
resolution unless it has acted in bad faith, engaged in gross negligence or
willful misconduct.

                                   MANAGEMENT

     The Ridgewood Companies, founded by Robert Swanson, began in 1982 with
Ridgewood Energy Corporation. In 1991, Ridgewood Renewable Power was formed to
manage a series of investment programs focusing on the independent electric
power generation industry. Ridgewood Renewable Power has sponsored twelve funds
that have invested primarily in environmentally friendly power plants such as
landfill gas-fired, biomass-fired, and hydroelectric generating facilities. In
1998, Ridgewood Capital was formed to take advantage of the dramatic growth in
the technology sector. Since then Ridgewood Capital has sponsored six investment
funds which have invested in private technology companies.

The Manager

     As the Manager of the Fund, Ridgewood Energy Corporation ("Ridgewood
Energy") will have direct and exclusive discretion in management and control of
the affairs of the Fund. Robert Swanson formed Ridgewood Energy, which has
sponsored oil, natural gas and other related natural resource investment
programs. The programs have acquired lease interests, financed them and
participated in making exploration, development, production, and marketing
decisions.

     Ridgewood Energy began by organizing investment programs in the oil and gas
industry for high net-worth individuals. From the outset, Ridgewood's programs
focused on returning high-yielding cash dividends to investors over an extended
period of time combined with certain tax benefits. Later programs de-emphasized
the tax benefits and have focused on revenues and profitability. Capital raised
from investors has been used to purchase interests in operations designed to
extract oil or natural gas from underwater deposits, mainly in the Gulf of
Mexico.


                                       41


THE PERFORMANCE OF PREVIOUS RIDGEWOOD PROGRAMS IN OTHER GULF OF MEXICO PROSPECTS
OR OF OTHER OPERATIONS IN SIMILAR OR CONTIGUOUS PROPERTIES SHOULD NOT BE
CONSIDERED TO PROVIDE ANY ASSURANCE THAT THIS FUND WILL BE SUCCESSFUL OR
GENERATE A PROFIT. SEE EXHIBIT B FOR RIDGEWOOD ENERGY'S TRACK RECORD.

Ridgewood's executive team includes:

Robert E. Swanson, age 58, is the Chairman and President, manager and
controlling shareholder of Ridgewood Energy. Mr. Swanson is the Chief Executive
Officer and controlling member of Ridgewood Renewable Power, Ridgewood Capital
Management and other affiliates. Mr. Swanson was a tax partner at the former New
York and Los Angeles law firm of Fulop & Hardee and an officer in the Investment
Division of Morgan Guaranty Trust Company. His specialty was in personal tax and
financial planning, including income, estate and gift tax. Mr. Swanson is a
member of the New York State and New Jersey bars. He is a graduate of Amherst
College and Fordham University Law School. Mr. Swanson and his wife, Barbara
Mardinly Swanson are the authors of "Tax Shelters, A Guide for Investors and
Their Advisors," published by Dow Jones-Irwin in 1982 and published in revised
editions in 1984 and 1985.

Greg Tabor, age 42 is Executive Vice President and Director of Business
Development for Ridgewood Energy. Mr. Tabor heads the Houston office of
Ridgewood Energy. Mr. Tabor has 20 years experience in petroleum business
development and as a land man responsible for negotiating leases, acquiring
properties, and divesting properties, with the largest part of his work devoted
to the Gulf of Mexico. Mr. Tabor came to Ridgewood in January 2004 from El Paso
Natural Gas Corp. where he was a senior business development officer. Mr. Tabor
worked for a decade primarily in the Gulf of Mexico on gas projects for Sante Fe
Corp. and its affiliates. Mr. Tabor is a graduate of the University of Houston.

Robert L. Gold, age 46, is Executive Vice President of Ridgewood Energy which he
joined in 1987. Mr. Gold is also the President of Ridgewood Capital since its
inception in 1998. As such, he has directed the investment programs of the prior
venture capital programs. For the two years prior to joining the Ridgewood
Companies, Mr. Gold was a corporate attorney in the law firm of Cleary,
Gottlieb, Steen & Hamilton in New York City. Mr. Gold is a member of the New
York bar. He is a graduate of Colgate University and New York University School
of Law.


                                       42


Kathleen McSherry, age 40 is Senior Vice President and Chief Financial Officer
of Ridgewood Energy. She joined Ridgewood Energy in 1987 as Assistant Controller
and was promoted in 1994 to Controller. In addition, Ms. McSherry serves as Vice
President of Systems and Administration of Ridgewood Renewable Power. Prior to
her employment at Ridgewood Energy, Ms. McSherry worked in the Trust department
for Midlantic National Bank. Ms. McSherry holds a Bachelor of Science degree in
Accounting

Daniel V. Gulino, age 45, is Senior Vice President and General Counsel of
Ridgewood Energy. He began his legal career as an associate for Pitney Hardin, a
large New Jersey law firm, where his experience included corporate acquisitions
and transactions. Prior to joining Ridgewood, Mr. Gulino was in-house counsel
for several large electric utilities, including GPU, Inc., Constellation Power
Source, Inc. and PPL Resources, Inc., where he specialized in non-utility
generation projects, independent power and power marketing transactions. Mr.
Gulino also has experience with the electric and natural gas purchasing of
industrial organizations, having worked as in-house counsel for Alumax, Inc.
(now part of Alcoa) where he was responsible for, among other things, Alumax's
electric and natural gas purchasing program. Mr. Gulino is a member of the New
Jersey State Bar and Pennsylvania State Bar. He is a graduate of Fairleigh
Dickinson University and Rutgers University School of Law - Newark.

Kenneth D. Webb, age 53, is Ridgewood Energy's Geoscience Manager and joined
Ridgewood Energy in April of 2004 in the Houston office. Mr. Webb has over 30
years of experience in the U.S. oil and gas industry, mainly in the onshore and
offshore Gulf of Mexico area. His responsibilities include the geoscience
evaluation of exploration and development opportunities presented to the
company, and maximizing the potential of Ridgewood properties. Prior to joining
Ridgewood, Mr. Webb worked for several large independent exploration and
development companies, including Enserch, Transco, CNG, and Seagull Energy, and
has held positions ranging from Staff Geologist to Vice President of
Exploration. In addition, Mr. Webb held the position of Geoscience Manager for
an independent acquisition and divestment company immediately before joining
Ridgewood.

Randy A. Bennett, age 48, is Land Manager and joined Ridgewood Energy in July
2004. He is located in Ridgewood Energy's Houston, Texas office. Mr. Bennett has
more than 20 years of experience in the domestic U.S. oil and gas exploration
and production business. Prior to joining Ridgewood Energy, Mr. Bennett was


                                       43


employed by both independent and major oil and gas exploration and production
companies including Sabine Corporation, Conoco, and most recently, 6 years with
Unocal. He is responsible for offshore Gulf of Mexico shelf and deepwater
exploration activities, production operations, business development, and
regulatory affairs. Mr. Bennett received a Bachelor of Science degree in
Petroleum Land Management from the University of Houston, is a Registered
Professional Landman (RPL), and is an active member of the American Association
of Professional Landmen, Houston association of Professional Landmen and the
Professional Landman's Association of New Orleans.

Mary Lou Olin, age 50, is Vice President and Secretary of the Manager, Ridgewood
Capital, Ridgewood Renewable Power and the Fund. Her primary areas of
responsibility are investor relations, communications and administration. Prior
to her employment at Ridgewood Energy in 1984, Ms. Olin was a Regional
Administrator at McGraw-Hill Training Systems where she was employed for two
years. Prior to that, she was employed by RCA Corporation. Ms. Olin has a
Bachelor of Arts degree from Queens College.

Mirna Valdes, age 43 is Ridgewood Energy's Vice President of Investor Relations.
She joined Ridgewood Energy in 1987 as Marketing Coordinator and was promoted in
1995 to Assistant Vice President. Prior to her employment at Ridgewood Energy,
Ms. Valdes worked at WABC-TV, New York. Ms. Valdes graduated from Taylor
Business Institute.

Please see Exhibit B for a Track Record of Ridgewood Energy's prior investments.


                                   TAX ASPECTS

     The following is a summary of material federal tax considerations for
persons considering an investment in the Fund. The discussion, among other
things, summarizes certain provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), the applicable Treasury Regulations promulgated or
proposed thereunder (the "Regulations"), current published positions of the
Internal Revenue Service (the "Service") and existing judicial decisions, all of
which are subject to change at any time.

     There can be no assurance that any deductions, credits or other tax
consequences which are described herein, or which a prospective Investor in the
Fund may contemplate, will be available. In addition, no assurance can be given


                                       44


that legislative or administrative changes or court decisions may not occur
which would significantly modify the statements expressed herein. In some
instances, these changes could have a substantial effect on the tax aspects of
the Fund. Any future legislative changes may or may not be retroactive with
respect to transactions prior to the effective date of such changes.

     Moreover, although the Fund has retained professional tax advisors, there
are risks and uncertainties concerning certain of the tax aspects associated
with an investment in the Fund and there can be no assurance that some or all of
the deductions or credits claimed by the Fund may not be challenged by the
Service. Disallowance of such deduction or credits could adversely affect the
Fund and the Investors. EACH PROSPECTIVE INVESTOR IS THEREFORE URGED TO CONSULT
HIS TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES ARISING FROM AN INVESTMENT
IN THE FUND.

     NO RULING FROM THE SERVICE REGARDING EITHER THE TAX ASPECTS OR THE STATUS
OF THE FUND AS A PARTNERSHIP FOR TAX PURPOSES HAS BEEN OR WILL BE REQUESTED.

     The description of the tax aspects discussed herein is supported by a tax
opinion of counsel to the Fund, Black & Associates. A copy of the tax opinion is
available upon request of any Investor. The tax opinion is, of course, not
binding on the Service or the courts.

     The legal discussion below is based upon (a) the facts set forth in this
Memorandum and the Exhibits hereto and (b) the following representations by the
Manager:

     o    No election has been filed by the Fund under the Regulations to be
          treated as an association taxable as a corporation and no such
          election shall be filed in the future, without the consent of a
          majority of the Investors;

     o    No interests in entities treated as partnerships or business trusts in
          which the Manager or any Affiliate has acted as the manager or the
          managing shareholder have ever been traded on a secondary market or
          the substantial equivalent thereof;

     o    The Manager will not allow any transfer of Shares which, in the
          opinion of its counsel, will cause the Fund's Shares to be treated as
          readily tradable on a secondary market or the substantial equivalent
          thereof without the consent of a majority of the Investors;


                                       45


     o    The Manager does not expect to be in a significantly lower federal
          income tax bracket than the Fund's Investors; and

     o    The Manager expects that at least 90% of the Fund's gross income for
          each year of its existence will consist of interest or income from the
          exploration, development, production, processing, refining,
          transportation or marketing of natural gas or oil and gains from the
          sale of assets used to generate that income.

     1. Limitations

     The federal income tax consequences described below are, to a significant
extent, available only to taxpayers who invest in the Fund with the bona fide
intent of deriving an economic profit without regard to any income tax
advantages. The determination of whether an Investor is participating in the
Fund for profit is subjective and based upon the motives of the particular
Investor. It is difficult to assess this subjective intent or anticipate the
future activities of any Investor, and thus it is assumed for purposes of this
discussion that the Investors shall have the requisite profit motive. A
determination that such is not the case would have a substantially adverse
effect upon the tax consequences of an investment in the Fund. No prospective
Investor should invest in the Fund unless the prospective Investor does so with
an intent to realize an economic profit without regard to tax consequences.

     Virtually all of the income tax consequences described herein are dependent
upon the fair market value of the property to be acquired by and the services
rendered to the Fund being not less than the price paid therefore. While the
Manager believes that the values of such property and services will be not less
than the prices paid, there can be no assurance that the Service or the courts
will concur with such valuations.

2.   Classification as a Partnership

     A. In General. Under the Regulations, a business entity other than a
corporation (or a "publicly traded partnership" which is treated as a
corporation) with more than one member which is formed after January 1, 1997,
will be treated as a partnership for federal income tax purposes unless the
business entity elects to be treated as an association taxable as a corporation.
The Manager has represented that no such election has been filed by the Fund nor
will any such election be filed in the future, without the consent of a majority
of the Investors.

     B. Publicly Traded Partnerships. Certain publicly traded partnerships are
treated as corporations for federal income tax purposes. Since the Fund will be


                                       46


treated as a partnership for federal income tax purposes, this provision is
applicable to the Fund. A "publicly traded partnership" is defined as "any
partnership if...(1) interests in such partnership are traded on an established
securities market, or (2) interests in such partnership are readily tradable on
a secondary market (or the substantial equivalent thereof)." The Shares do not
and are not intended to trade on an established securities market.

     Under the Regulations, interests in a partnership are considered to be
readily tradable on a secondary market or the substantial equivalent thereof if:

     "(i) Interests in the partnership are regularly quoted by any person, such
as a broker or dealer, making a market in the interests;

     (ii) Any person regularly makes available to the public (including
customers or subscribers) bid or offer quotes with respect to interests in the
partnership and stands ready to effect buy or sell transactions at the quoted
prices for itself or on behalf of others;

     (iii) The holder of an interest in the partnership has a readily available,
regular, and ongoing opportunity to sell or exchange the interests through a
public means of obtaining or providing information of offers to buy, sell, or
exchange interests in the partnership; or

     (iv) Prospective buyers and sellers otherwise have the opportunity to buy,
sell or exchange interests in the partnership in a time frame and with the
regularity and continuity that is comparable to that described in the other
provisions of this paragraph . . . ."

     No interests in partnerships, business trusts or limited liability
companies in which the Manager or any of its Affiliates has acted or is acting
as the Manager or the managing shareholder have ever been traded on a secondary
market or the substantial equivalent thereof, as defined in such Regulations.
The Manager also will not allow any transfer of Shares which, in the opinion of
its counsel, will cause the Fund's Shares to be treated as readily tradable on
such market without the consent of a majority of the Investors.

     In addition, no partnership will be treated as a corporation for federal
income tax purposes for any year if at least 90% of the partnership's gross
income for such year and all preceding years consists of, among other things,
interest or income from the exploration, development, production, processing,
refining, transportation or marketing of oil and gas and gains from the sale of
assets used to generate that income. The Manager has represented that the Fund
is expected to meet the foregoing 90% gross income test during each year of its
existence.


                                       47


     If (i) the Shares were in the future to become readily tradable as defined
above, or in subsequent Regulations, rulings or other relevant authority and
(ii) if the Fund would fail to satisfy the above 90% gross income test, the Fund
could for this reason become taxable as a corporation for federal income tax
purposes.

     C. Summary. Assuming the Fund does not file an election under the
Regulations to be treated as an association taxable as a corporation and does
not become a "publicly traded partnership" as defined above, in the opinion of
Black & Associates, the Fund shall be treated as a partnership for federal
income tax purposes. Black & Associates' opinions are based upon the existing
provisions of the Code, the Regulations and interpretations thereof by the
Service and the courts. As mentioned, no assurance can be given that such laws
and Regulations will not be changed or that such changes will not be
retroactive.

3.   Fund Taxation

     Subject to the foregoing, it is the opinion of Black & Associates that the
Fund will not be subject to federal income tax. The Fund will, however, be
required each year to file Partnership information tax returns.

     The Investors will be required to take into account, in computing their
federal income tax liabilities, their respective distributive shares of all
items of Fund income, gain, expense, loss, deduction, credit and tax preference
for any taxable year of the Fund ending within or with the taxable year of the
respective Investor, without regard to whether such Investors have received or
will receive any cash distributions from the Fund. An Investor therefore may be
subject to tax if the Fund has income even though no cash distribution is made.

     If the cash distributed by the Fund for any year to an Investor, including
his share of the reduction of any Fund liabilities, exceeds his share of the
Fund's undistributed taxable income, the excess will constitute a return of
capital. A return of capital is applied first to reduce the tax basis of the
Investor's interest in the Fund, and any amounts in excess of such tax basis
will generally be treated as gain from a sale of such Investor's interest in the
Fund.


                                       48


     The Social Security Act and the Code exclude from the definition of "net
earnings from self-employment" a limited partner's distributive share of any
item of income or loss from a partnership other than a guaranteed payment for
personal services actually rendered. In the opinion of Black & Associates, this
provision would apply to the Investors. Among other things, the effect of this
provision is that (a) no quarters of coverage of increased benefits under the
Social Security Act will be earned by Investors by virtue of their shares of the
Fund's income and (b) if any Investors are currently receiving Social Security
benefits, their respective distributive shares of taxable income from the Fund
will not have be taken into account in determining any reduction in benefits
because of "excess earnings".

4.   Leasehold Acquisition Costs

     The cost of acquiring leases, or other similar property interests, is a
capital expenditure and may not be deducted in the year paid or incurred but
must be recovered through depletion. If, however, a lease is proved to be
worthless by drilling or abandonment, the cost of such lease (less any recovery
thereof through the depletion deduction) constitutes a loss to the taxpayer in
the year in which the lease becomes worthless.

5.   Deduction of Intangible Drilling and Development Costs

     Section 263(c) authorizes an election by the Fund to deduct as expenses
intangible drilling and development costs incurred in connection with natural
gas or oil wells at the time such costs are incurred in accordance with the
Fund's method of accounting, provided that the costs are not more than would be
incurred in an arm's length transaction with an unrelated drilling contractor.
Such costs include, for example, amounts paid for labor, fuel, wages, repairs,
supplies and hauling necessary to the drilling of the well and preparation of
the well for production. Generally, this election applies to items that in
themselves do not have salvage value. Alternatively, each Investor may elect to
capitalize his or her share of the intangible drilling and development costs and
amortize them ratably over a 60-month period.

     The Fund may enter into "Carried Interest" arrangements whereby the Fund
would purchase interests in certain leases and agree to pay a disproportionate
part of the costs of drilling the first well thereon. In such situations, the
party who is paying more than his share of costs of drilling may not deduct all
of such costs as intangible drilling and development costs unless his percentage
of ownership of the lease is not reduced before he has recovered from the first
production of the well an amount equal to the cost he incurred in drilling,


                                       49


completing, equipping and operating the well. The Fund may not have this right
in certain of the transactions of this type in which it may engage. If
circumstances permit, however, the Fund will adopt the position that all of the
intangible drilling and development costs incurred are deductible (even though
such costs may be disproportionate to its ownership of the lease) on the basis
that such arrangements constitute partnerships for federal income tax purposes
and that the excess intangible drilling and development costs are specifically
allocable to the Fund. There can be no assurance that this position would
prevail against attack by the Service.

     In the case of an Investor which constitutes an "integrated oil company,"
30% of the amount otherwise allowable as a deduction for intangible drilling
costs under Section 263(c) must be capitalized and deducted ratably over a
60-month period beginning with the month the costs are paid or incurred. This
provision does not apply to nonproductive wells. For this purpose, an
"integrated oil company" is generally defined as an individual or entity with
retail sales of oil and gas aggregating more than $5 million and refining more
than 50,000 barrels per day for the taxable year.

     To the extent that drilling and development services are performed for the
Fund in 2006, amounts incurred pursuant to bona fide arm's-length drilling
contracts and constituting intangible drilling and development costs should be
deductible by the Fund in 2006. To the extent that such services are performed
in 2007, however, the Fund will only be allowed to deduct in 2006 amounts that
are:

     o    incurred pursuant to bona fide arm's-length drilling contracts which
          provide for absolute noncontingent liability for payment, and

     o    attributable to wells spudded within 90 days after December 31, 2006.

Sections 461(h)(1) and 461(i)(2) provide, in relevant part:

          ...in determining whether an amount has been incurred with respect to
          any item during any taxable year, the all events tests shall not be
          treated as met any earlier than when economic performance with respect
          to such item occurs.

                                      * * *

          ...economic performance with respect to the act of drilling an oil or
          gas well shall be treated as having occurred within a taxable year if
          drilling of the well commences before the close of the 90th day after
          the close of a taxable year.


                                       50


     The clear implication of these provisions is that an amount incurred during
a taxable year for drilling or completion services which could otherwise be
accrued for tax purposes will not be disqualified as a deduction merely because
the services are performed during the subsequent taxable year (provided that the
services commence within the first 90 days of such subsequent year).

     Consequently, in the opinion of Black & Associates, intangible drilling and
development costs meeting the above criteria should be deductible by the Fund in
2006 even though a portion of such costs are attributable to services performed
during 2007.

     Each Investor, however, may deduct his share of amounts paid in 2006 for
services performed in 2007 only to the extent of his "cash basis" in the Fund as
of the end of 2006. For this purpose, a taxpayer's "cash basis" in a tax shelter
which is taxable as a partnership (such as the Fund) is the taxpayer's basis in
the Fund determined without regard to any amount borrowed by the taxpayer with
respect to the Fund which (a) is arranged by the Fund or by any person who
participated in the organization, sale or management of the Fund (or any person
related to such person within the meaning of Section 461(b)(3)(c)), or (b) is
secured by any asset of the Fund. Inasmuch as "cash basis" excludes borrowing
arranged by an extremely broad group of persons who could be "related" to a
person who "participated" in the organization, sale or management of the Fund,
it is not possible for counsel to the Fund to express an opinion as to whether
each Investor will be allowed to deduct his allocable share of any prepaid
drilling expenses to the extent that they exceed his actual cash investment in
the Fund. Amounts borrowed by an Investor from the Manager or any of its
Affiliates and borrowing arranged by such persons will not be considered part of
such Investor's "cash basis" for these purposes.

6.   Depletion

     Subject to the limitations discussed hereafter, the Investors will be
entitled to deduct, as allowances for depletion under Section 611, their share
of percentage or cost depletion, whichever is greater, for each oil and gas
producing property owned by the Fund.

     Cost depletion is computed by dividing the basis of the property by the
estimated recoverable reserves to obtain a unit cost, then multiplying the unit
cost by the number of units sold in the current year. Cost depletion cannot


                                       51


exceed the adjusted basis of the property to which it relates. Thus, cost
depletion deductions are limited to the capitalized cost of the property, while
percentage depletion may be taken as long as the property is producing income.
The depletion allowance for oil and gas production will be computed separately
by each Investor and not by the Fund. The Fund will allocate to each Investor
his proportionate share of production and the adjusted basis of each Fund
property. Each Investor must keep records of his share of the adjusted basis and
any depletion taken on the property and use his adjusted basis in the
computation of gain or loss on the disposition of the property by the Fund.

     Percentage depletion with respect to production of oil and gas is available
only to those qualifying for the independent producer's exemption, and is
limited to an average of 1,000 barrels per day of domestic oil production or
6,000,000 cubic feet per day of domestic gas production. The applicable rate of
percentage depletion on production under the independent producer exemption is
15% of gross income from oil and gas sales. The depletion deduction under the
independent producer exemption may not exceed 65% of the taxpayer's taxable
income for the year, computed without regard to certain deductions. Any
percentage depletion not allowed as a deduction due to the 65% of adjusted
taxable income limitation may be carried over to subsequent years subject to the
same annual limitation. For an Investor that is a trust, the 65% limitation
shall be computed without deduction for distributions to beneficiaries during
the taxable year.

     The determination of whether an Investor will qualify for the independent
producer exemption will be made at the Investor level. An Investor who qualifies
for the exemption, but whose average daily production exceeds the maximum number
of barrels on which percentage depletion can be computed for that year, will
have to allocate his exemption proportionately among all of the properties in
which he has an interest, including those owned by the Fund. In the event
percentage depletion is not available, the Investor would be entitled to utilize
cost depletion as discussed above.

     The independent producer exemption is not available to a taxpayer who
refines more than 50,000 barrels of oil on any one day in a taxable year or who
directly or through a related person sells oil or gas or any product derived
therefrom (i) through a retail outlet operated by him or a related person or
(ii) to any person who occupies a retail outlet which is owned and controlled by
the taxpayer or a related person. In general, a related person is defined by
Section 613A of the Code as a corporation, partnership, estate, or trust in
which the taxpayer has a 5% or greater interest. For the purpose of applying
this provision: (i) bulk sales of oil or natural gas to commercial or industrial


                                       52


users are excluded from the definition of retail sales; (ii) if the taxpayer or
a related person does not export any domestic oil or natural gas production
during the taxable year or the immediately preceding year, retail sales outside
the U.S. are not deemed to be disqualifying sales; and (iii) if the taxpayer's
combined receipts from disqualifying sales do not exceed $5,000,000 for the
taxable year of all retail outlets taken into account for the purpose of
applying this restriction, such taxpayer will not be deemed a "retailer."

     The technical provisions and limitations relating to the availability of
depletion are complex and will vary among taxpayers. Many uncertainties exist
and each prospective Investor should review his individual circumstances with
his personal tax advisor.

7.   Depreciation

     Costs of equipment, such as casing, tubing, tanks, pumping units,
pipelines, production platforms and other types of tangible property and
equipment generally cannot be deducted currently, but may be eligible for
accelerated cost recovery. All or part of the depreciation claimed may be
subsequently recaptured upon disposition of the property by the Fund or of a
Share by any Investor.

     In addition, the Code provides for certain uniform capitalization rules
which could result in the capitalization rather than deduction of Fund overhead
and administration costs.

8.   Farm-outs and Back In Interests

     The Fund may acquire leaseholds through Farm-out Agreements. Some Farm-outs
may be characterized for tax purposes as partnerships entered into by the Fund
and an Operator. The manner in which the parties to these Farm-outs agree to
allocate income, gain, loss, deductions, and credits (or any item thereof) may
be disallowed under Section 704 of the Code. If the Farm-out creates a
co-ownership arrangement, the Fund may be required to capitalize a portion of
the intangible drilling and development costs paid in excess of its fractional
share of the Working Interest acquired pursuant to the agreement. One type of
Farm-out in which the Fund might participate is a transaction in which, in
exchange for the drilling of a well on a particular drill site, an Operator
becomes entitled to an assignment of 100% of the leasehold interest in the drill
site acreage (until such time as the Operator's drilling, completion and
production costs are recovered out of production therefrom, with a lesser
percentage thereafter) and a lesser fractional interest in the portion of the
tract exclusive of the drill site acreage. The Service has ruled, in Revenue


                                       53


Ruling 77-176, 1977-1 Cum. Bul. 77, that any transfer of rights in property
other than the drill site acreage in this type of transaction would be deemed a
sale of such other property by the party transferring the property on which gain
or loss is realized. The Service further ruled that, while the party receiving
the acreage and incurring the cost of drilling the well on the drill site may
elect to deduct such costs as intangible drilling and development costs, such
party would realize ordinary income equal to the value of the acreage earned
exclusive of the drill site acreage.

     The Fund will attempt to structure any Farm-out or similar transaction in a
way that either eliminates or minimizes to the fullest extent possible the tax
consequences described above. Nevertheless, the ruling may have adverse tax
implications for the Fund if and when the Fund enters into such Farm-outs, since
the Fund may recognize gain or loss upon the transfer of an interest in the
property.

9.   Allocations

     In the opinion of Black & Associates, the allocations of each Investor's
share of income, gain, expense, loss, deduction or credit as set forth in the
LLC Agreement will more likely than not be sustained for federal income tax
purposes.

     Under Section 704, a partner's distributive share of the income, gain,
expense, loss, or credit of a partnership is determined in accordance with the
partnership agreement, unless the allocation set forth therein is without
"substantial economic effect." An allocation will have substantial economic
effect only if it may actually affect the dollar amount of the partners' shares
of the total partnership revenue or costs independently of tax consequences.
Allocations which do not affect the amounts to be distributed from a partnership
generally do not have substantial economic effect. It is essential that the
allocations be reflected in the partners' capital accounts and that such capital
accounts be the basis upon which distributions are made upon liquidation.
Several relevant factors that are considered in making a determination as to
whether an allocation will be recognized for federal income tax purposes are
outlined in the Regulations. These factors include, among others, (1) the
presence of a business purpose for the allocation, (2) whether related items of
income, gain, expense, loss, deduction or credit from the same source are
subject to the same allocation, (3) whether the allocation was made without
recognition of normal business factors, (4) whether it was made only after the
amount of the specially allocated item could reasonably be estimated, (5) the
duration of the allocation and (6) the overall tax consequences of the
allocation. These factors and perhaps others may be relevant in determining
whether an allocation has substantial economic effect.


                                       54


     The Regulations relating to special allocations of partnership costs and
revenues under Section 704(b) provide that partnership allocations have economic
effect (and thus would be valid under the Code provided such effect is
substantial) only if they are consistent with the underlying economic
arrangements of the partners. Under the Regulations, an allocation of income,
gain, expense, loss, deduction or credit (or item thereof) to a partner is
considered to have economic effect if, throughout the full term of the
partnership, the partnership agreement provides:

     o    For the determination and maintenance of the partners' capital
          accounts in accordance with the Regulations;

     o    Upon liquidation of the partnership (or any partner's interest in the
          partnership), for liquidating distributions in all cases to be made in
          accordance with the positive capital account balances of the partners,
          as determined after taking into account all capital account
          adjustments for the partnership taxable year during which such
          liquidation occurs (other than those made pursuant to this requirement
          and the third requirement below), by the end of such taxable year (or,
          if later, within 90 days after the date of such liquidation); and

     o    For a "qualified income offset" provision as defined in Regulation
          Section 1.704-1(b)(2)(ii)(d) and a "minimum gain charge-back"
          provision as defined in Regulation Section 1.704-2(f).

     No allocation to a partner will be given effect, however, which would cause
or increase a negative capital account balance for such partner in excess of
that partner's share of the partnership minimum gain. In general, a partnership
has minimum gain to the extent that nonrecourse liabilities encumbering
partnership property exceed the adjusted tax basis of such property.
     Under the LLC Agreement, a capital account is to be maintained for each
Investor to which will be charged each item of Fund income, gain, expense, loss,
deduction and credit in accordance with the rules set forth in the Regulations.
Upon dissolution of the Fund, after satisfying all Fund liabilities, each
Investor will receive a distribution in accordance with the Investor's positive
capital account balance. In addition, the LLC Agreement contains a "qualified
income offset" provision as defined in Regulation Section 1.704-1(b)(2)(ii)(d)
and a "minimum gain charge-back" provision as defined in Regulation section
1.704-2(f).


                                       55


     Regulation Section 1.704-1(b)(2)(iii)(a) presently provides that the
economic effect of an allocation is not substantial if, at the time the
allocation becomes part of the partnership agreement, (1) the after-tax economic
consequences of at least one partner may, in present value terms, be enhanced
compared to such consequences if the allocation were not contained in the
partnership agreement, and (2) there is a strong likelihood that the after-tax
economic consequences of no partner will, in present value terms, be
substantially diminished compared to such consequences if the allocation were
not contained in the partnership agreement. In determining the after-tax
economic benefit or detriment to a partner, tax consequences that result from
the interaction of the allocation with such partner's tax attributes that are
unrelated to the partnership will be taken into account.

     Under the LLC Agreement, 99 percent of all items of Fund expense, loss,
deduction and credit attributable to the acquisition, drilling and completion of
the Fund's Projects will generally be allocated to the Investors. This
allocation appears to satisfy the first test of Regulation Section
1.704-1(b)(2)(iii)(a) inasmuch as it will presumably enhance the after-tax
consequences to an Investor. The second test is not expected to be met, since
the Manager has represented that it does not expect to be in a significantly
lower income tax bracket than the Investors. In any case, there appears to be no
statutory authority for the position taken by the Treasury Department in
Regulation Section 1.704-1(b)(2)(iii)(a), inasmuch as it would appear to
disallow any special allocation which would enhance the after-tax economic
consequences to any partner, whether or not the allocation has substantial
economic effect.

     Accordingly, it is Black & Associates opinion that the allocations set
forth in the LLC Agreement will more likely than not have the requisite
substantial economic effect.

     If the allocations are not recognized, Section 704(b) requires that each
Investor's distributive share be determined in accordance with his interest in
the Fund, as determined from all the facts and circumstances. The most likely
consequences of an adverse determination in this regard would be the
disallowance of approximately 14% of the deductions taken by the Investors with
respect to the acquisition, drilling and completion of the Fund's wells.

     Section 706 and the Regulations thereunder provide generally that a partner
may be allocated items of partnership income and deductions only for that
portion of the Fund's taxable year that the partner is a partner. Accordingly,
the partnership shall allocate such items only to those Investors who are
already admitted to the Fund at the time such expenses were incurred.


                                       56


10.  Organization, Start-up and Syndication Expenses

     Section 709(a) prohibits any Investor from deducting any amounts paid or
incurred to organize the Fund or to promote the sale of (or to sell) an interest
in the Fund. Amounts paid to organize the Fund, however, may, at the election of
the Fund, be treated as deferred expenses of which the first $5,000, when
combined with all "startup" expenses (see below), may be deducted when incurred
and the remainder deducted ratably over a period of not less than 180 months.
Organization expenditures that may be amortized are those (i) incurred incident
to the creation of the Fund, (ii) chargeable to the capital account, and (iii)
of a character which, if expended incident to the creation of a partnership
having an ascertainable life, would be amortized over such life. The Fund
presently intends to amortize qualifying organization expenditures over a
60-month period.

     Expenses connected with the promotion or sale of interests in a
partnership, known as syndication fees, are not deductible by the Fund or the
Investors and are not eligible for the 180-month amortization as is the case for
organizational expenses. Syndication fees include such expenditures connected
with the issuing and marketing of interests in a partnership such as sales
commissions, certain professional fees, selling expenses and printing costs.
Regulation Sections 1.709-1 and 1.709-2 make it clear that the definition of
syndication costs includes counsel fees related to securities law advice,
certain accountants' fees, brokerage fees and registration fees. The allocation
of certain expenses between organization costs and syndication costs is a
question of fact and the Manager will use reasonable judgment in claiming
amortization deductions for a portion of the Organizational, Distribution and
Offering Fee and other expenses. The Service may on audit contest such
deductions.

     Section 195 provides that no deduction is allowed for "start-up
expenditures." However, taxpayers may elect under that section to deduct the
first $5,000 of the combined organizational expenses and "start-up expenditures"
when incurred, and the remainder of the "startup expenditures" over a period of
not less than 180 months. "Start-up expenditures" include amounts paid or
incurred in connection with investigating the creation or acquisition of an
active trade or business or paid or incurred in connection with any activity
engaged in for profit and for the production of income prior to the day on which
the active trade or business begins, in anticipation of the activity becoming an
active business.


                                       57


     A significant portion of the Fund's expenses may be characterized as
"start-up expenditures" for federal income tax purposes. Consequently, the Fund
intends to elect to amortize such expenses over a 60-month period.

     While the Manager will use its best judgment in the allocation of expenses
among start-up, organization, syndication and other costs, no assurance can be
given that such allocation will not be challenged by the Service. In particular,
the Service may claim that various fees paid to the Manager constitute
syndication expenses.

11.  Distributions

     Cash distributions by the Fund to an Investor will not result in taxable
gain to such Investor unless they exceed the Investor's adjusted basis in his
Shares, in which case the Investor will recognize gain in the amount of such
excess. Non-liquidating distributions of property other than cash to an Investor
will reduce the Investor's basis in the Fund by an amount equal to the Fund's
basis in such property; provided, however, that the adjusted basis of the
Investor may not be reduced below zero. An Investor's tax basis in any property
distributed to the Investor will be an amount equal to the amount of reduction
in the Investor's basis in the Investor's Shares, occurring by reason of such
distribution, regardless of the value of the property distributed. A reduction
in an Investor's share of Fund indebtedness will be treated as a cash
distribution to the Investor to the extent of such reduction. Under some
circumstances, distributions from the Fund to an Investor may cause the amount
the Investor has at risk with respect to the Fund activity to fall below zero,
which could result in recapture of previously deducted losses.

12.  Trade or Business Requirement

     The Service may seek to disallow certain deductions claimed by the Fund on
the ground that these expenditures are not expenditures incurred in carrying on
a trade or business because the Fund will not have established and commenced its
business at the time the expenditures are made.

     Neither the Code nor the Regulations provide any explicit definitions of
"carrying on a trade or business." Although various subjective criteria have
been recommended for consideration in this regard, no single factor has been
found to be controlling. Further, determining the point in time when a


                                       58


particular venture begins carrying on a trade or business is essentially a
question of fact, the resolution of which is not to be determined solely from
the intention of the taxpayer. The Service might contend that the Fund is not
engaged in carrying on any trade or business within the meaning of Section
162(a) until such time as the business has begun to function as a going concern,
performs those activities for which it was organized and starts to generate
receipts. In addition, the Service may contend that certain expenses are in the
nature of "start-up" expenses rather than currently deductible trade or business
expenses.

     In the event that the Service were to disallow Fund expenses based upon the
failure of the Fund to have been carrying on a trade or business, the Fund
expects to take the position that its expenses may be deducted in any case under
Section 212 which provides for deductions ("Miscellaneous Deductions") for
amounts incurred for the production of income, for the management, conservation,
or maintenance of property held for the production of income and in connection
with the determination, collection or refund of any tax.

     Under Code Section 67, however, expenses of an individual taxpayer which
are otherwise deductible under Section 212 are disallowed to the extent that
they, when combined with the taxpayer's other Miscellaneous Deductions, do not
exceed 2% of his adjusted gross income. If, for any period, the Fund is found
not to be engaged in a trade or business, the Service could thus disallow an
Investor's share of various expenses of the Fund to the extent that such share,
when combined with the Investor's otherwise allowable Miscellaneous Deductions,
does not exceed such 2% threshold.

13.  Alternative Minimum Tax

     The Code imposes an alternative minimum tax in order to assure that
taxpayers may not reduce their tax below a minimum level through certain "tax
preference items." In general, the alternative minimum tax liability of a
noncorporate taxpayer is calculated by (1) adding together the taxpayer's
adjusted gross income and the taxpayer's tax preference items, (2) adding and
subtracting certain other specified items, and (3) then subtracting the
applicable exemption of $40,250 for single taxpayers, $58,000 for married
taxpayers filing joint returns, $29,000 for married taxpayers filing separate
returns, or $22,500 for estates and trusts. Married taxpayers filing separate
returns must also add to that total an amount equal to the lesser of (a) 25% of
the sum determined under clauses (1) and (2) above, in excess of $191,000, or
(b) $29,000. The total amount determined in the preceding two sentences (the


                                       59


"Taxable Excess") is then taxed at the following rates: all taxpayers other than
married individuals filing separate returns are taxed at 26% of the first
$175,000 of the Taxable Excess and at 28% of any additional Taxable Excess,
reduced by any applicable foreign tax credit; while married individuals filing
separate returns are taxed at 26% of the first $87,500 of the Taxable Excess and
at 28% of any additional Taxable Excess, reduced by any applicable foreign tax
credit. These rates are subject, however, to the 15% maximum tax rate on
long-term capital gains (and qualified dividends). The taxpayer must then pay
the greater of the alternative minimum tax or the regular income tax. Generally,
no tax credits (other than the foreign tax credit) are allowable against the
alternative minimum tax. Under the Code, the exemptions listed in clause (3)
above are phased out where alternative minimum taxable income exceeds $150,000
($112,500 for single persons and $75,000 for estates, trusts and married persons
filing separately).

     Alternative minimum tax preference items and adjustments which only result
in a deferral of tax rather than a permanent reduction may give rise to a credit
against regular tax payable by Investors in future years.

     Although an investment in the fund is unlikely to cause an individual
Investor to report preference items, the intangible drilling deductions ("IDC")
allocated to such Investor by the Fund may increase his or her alternative
minimum taxable income ("AMTI"). A taxpayer who is not an integrated oil company
may not reduce AMTI by more than 40 percent of the AMTI that would otherwise be
reportable had the taxpayer been subject to the "excess IDC" tax preference.
That tax preference is generally the amount by which (a) the excess of the
actual IDC deduction over the deduction which would have been allowable if the
costs were capitalized and taken ratably over 10 years (or in accordance with
cost depletion) is greater than (b) 65 percent of the taxpayers income from oil,
gas and geothermal properties. Any portion of the IDC taken under the 60-month
amortization election may be excluded from the foregoing calculation.

     An adjustment that may increase or decrease alternative minimum taxable
income is depreciation attributable to personal property placed in service after
1986 that differs from the amount available under the 150 percent declining
balance method.

     The applicability of the alternative minimum tax must be determined by each
individual Investor based upon the operations of the Fund and his personal tax
situation. In many circumstances, the federal (and state) minimum tax provisions
will substantially eliminate the value of intangible drilling deductions for


                                       60


individual taxpayers. Accordingly, any potential investor in the Fund should
consult his own tax advisor to determine the tax consequences to him personally
of the alternative minimum tax.

14.  Termination of the Fund

     The actual or constructive termination of the Fund may have important tax
consequences to the Investors. All Investors would recognize their distributive
shares of Fund income, gain, expense, loss, deduction or credit accrued during
the Fund's taxable year up until the date of termination whether or not any such
items are distributed. Similarly, the Investors must account for their
distributive shares of gains or losses realized from the sale or other
disposition of Fund assets in liquidation of the Fund. The Code provides that if
50% or more of the capital and profit interests in a Fund are sold or exchanged
within a single twelve-month period, the Fund will terminate for tax purposes.
If such a termination occurs, the assets of the Fund will be deemed
constructively distributed pro rata to the Shareholders and then recontributed
by them to a new (for tax purposes) partnership.

     Upon the distribution of Fund assets incident to the termination of the
Fund, an Investor will recognize gain to the extent that money distributed to
the Investor plus the pro rata amount, if any, of liabilities discharged exceeds
the adjusted basis of his or her Shares immediately before the distribution.
Assuming that an Investor's interest in the Fund is a capital asset, such gain
will be capital gain unless Section 751 applies. Section 751 provides generally
that a partner's gain on liquidation of a Fund will be treated as ordinary
income to the extent that the partner receives or is deemed to receive less than
the partner's pro rata share of certain ordinary income assets, including
unrealized receivables and potential recapture of depreciation, depletion and
intangible drilling costs. No loss will be recognized by an Investor on the
distribution to the Investor of Fund property upon the termination of the Fund
unless the only such property distributed is money, unrealized receivables and
inventory. For these purposes, "money" includes marketable securities.

15.  Activities Engaged in for Profit

     Section 183 provides limitations for deductions attributable to an
"activity not engaged in for profit." The term "activity not engaged in for
profit" means an activity other than one which constitutes a trade or business,
or one that is engaged in for the production or collection of income or for the
management, conservation or maintenance of property held for the production of


                                       61


income. The determination of whether an activity is not engaged in for profit is
based on all the facts and circumstances and no one factor is determinative.

     Section 183 creates a presumption that an activity is engaged in for profit
if in any three years out of five consecutive taxable years the gross income
derived from the activity exceeds the deductions attributable thereto. Thus, if
the Fund fails to produce a profit in at least three of five consecutive years,
the presumption will not be available and the possibility of successful
challenge by the Service substantially increases. If Section 183 is successfully
asserted by the Service, no deductions will be allowed in excess of Fund income.

     Since the test of whether an activity is deemed to be engaged in for profit
is based on the facts and circumstances existing from time to time, no assurance
can be given that Section 183 may not be applied in the future to disallow
deductions taken by the Investors with respect to their interest in the Fund.

     It should be noted that, if the Service were to challenge an Investor's
deduction of Fund losses for lack of profit motive, such Investor would have the
burden of proving that the Fund did in fact enter into the transaction with a
reasonable expectation of profit and that the Investor's own investment in the
Fund was made with the requisite profit motive.

16.  Material Distortion of Income

     Section 446(a) provides that taxable income shall be computed under the
method of accounting on the basis of which the taxpayer regularly computes the
taxpayer's income in keeping the taxpayer's books. Section 446(b) provides,
however, that if the method used does not clearly reflect income, the
computation shall be made under such method as does clearly reflect income in
the opinion of the Service. If the method of accounting used by the taxpayer
does not clearly reflect income, Section 446(b) grants the Service discretion to
compute the taxpayer's taxable income "under such method" as the Service
determines does clearly reflect income.

     It has been established that the Service's authority to change a method of
accounting may be used to correct not only the overall method of accounting of
the taxpayer but also the accounting treatment of any item. See, e.g., Burck v.
Commissioner, 533 F.2d 768 (2d Cir. 1976).


                                       62


     The Service claims a very broad authority under Section 446(b) to disallow
any deduction where the deduction results in what it determines to be "a
material distortion of income." An example of the Service's position is Revenue
Ruling 79-229, 1979-2 Cum. Bull. 210, which sets forth some of the factors it
can consider in determining whether a deduction results in a material distortion
of income, such as the customary practice of the taxpayer, the amount of the
expense in relation to such expenses in the past, and the materiality of the
expenditure in relation to the taxpayer's income for the year.

     The broad authority claimed by the Service in Revenue Ruling 79-229 is
similar to a position taken by it in the past. However, on at least one
occasion, the United States Supreme Court specifically rejected the reasoning
that the Service has the authority to make exceptions to the general rule of
accounting by annual periods if it determines that it would be unjust or unfair
not to isolate a particular transaction and treat it on the basis of the
long-term result. Despite this authority, the Service may analyze deductions
taken by the Fund and attempt to reallocate such deductions to another taxable
year to the extent the Service determines that such deductions materially
distort income. Since the material distortion of income test is based upon the
facts and circumstances of a specific transaction, counsel cannot express an
opinion as to the likely outcome of an attempted reallocation of Fund deductions
by the Service.

17.  Fund Borrowing

     Any Fund income applied to the repayment of Fund borrowing will remain
taxable as income to the Investors although no distribution is made to them. A
foreclosure or other sale of any Fund property securing any such indebtedness
may also result in an Investor's realization of income for income tax purposes
even if no proceeds are distributed to the Investor. In determining for federal
income tax purposes the amount received on the sale or disposition of an
interest in the Fund an Investor must take into account, among other things, the
Investor's share of Fund indebtedness. An Investor may, therefore, realize an
amount of taxable gain in excess of the actual proceeds of a sale or disposition
of Fund property or of the Investor's interest in the Fund.

     All Investors should be aware of the restrictions, contained in the Code,
on the deductibility of interest paid by an Investor.

18.  Reportable Transactions

     A taxpayer who participates in a "reportable transaction" is required to
attach a statement to his, her or its federal income tax return for the year in


                                       63


which the taxpayer participates in the transaction, disclosing the nature of
such reportable transaction. "Reportable Transactions" are certain transactions
defined in the Regulations and Service rulings. The Fund may enter into
transactions which fall within the definition of "Reportable Transactions".
Possible examples include losses in excess of two million dollars in one taxable
year and transactions where the amount reported for tax purposes differs by more
than ten million dollars from the amount utilized for non-tax purposes. The
filing of a disclosure statement by the Fund could result in an audit of the
Fund's partnership information return by the Service, which in turn could result
in audits of the tax returns of Investors.

19.  Audits, Interest and Penalties

     Under the Code, the Service is permitted to audit a partnership's tax
return instead of having to audit the individual tax returns of the partners, so
that a partner would be subject to determinations made by the Service or the
courts at the partnership level. A partner is entitled to participate in such an
audit, or in litigation resulting therefrom, only in limited circumstances. In
the event that any audit results in a change in the Fund's return and an
increase in the tax liability of an Investor, there may also be imposed
substantial amounts of nondeductible interest and penalties. In addition to the
interest imposed on deficiencies (presently 7% per year compounded daily), the
Code now provides a penalty equal to 20% of any underpayment of tax attributable
to (1) negligence, any careless, reckless or intentional disregard of rules or
regulations, or any failure to make a reasonable attempt to comply with the
Code, (2) a substantial underpayment of tax (i.e., one which exceeds the greater
of $5,000 or 10% of the correct tax liability) which was neither based upon
substantial authority nor adequately disclosed or (3) any substantial valuation
misstatement (i.e., a valuation which exceeds 200% or is less than 50% of the
correct value) which, when combined with any other substantial valuation
misstatements for the taxable year, resulted in an underpayment of tax exceeding
$5,000. If a substantial valuation misstatement exceeds 400% or is less than 25%
of the correct value, the penalty is increased to 40% of any underpayment
attributable to such misstatement.

     Investors must generally treat partnership items on their federal income
tax returns consistently with the treatment of such items on the partnership
information return filed by the Fund, unless the Investor files a statement with
the Service identifying the inconsistency or otherwise satisfies the conditions
for waiver of the consistency requirement. Failure to satisfy this requirement
will result in an adjustment to conform the Investor's treatment of the item
with the treatment of the item on the partnership information return filed by
the Fund. Intentional or negligent disregard of the consistency requirement may
subject an Investor to substantial penalties.


                                       64


     Because of the potentially substantial effect of all the foregoing
provisions, each prospective Investor should consult with his tax advisor about
these provisions before acquiring Shares.

20.  Sales of Fund Property

     The sale or disposition of Fund property used in the Fund's business will
generate a gain or loss equal to the difference between the amount realized on
such sale or other disposition and the Fund's adjusted basis in the property. In
general, gain realized from the sale or disposition of such property which is
depreciable property or land and was held for more than one year should qualify
as gain from the sale of a Section 1231 asset, except to the extent that any
such gain is attributable to property subject to recapture. Each Investor is
generally entitled to treat the Investor's share of Section 1231 gains and
losses as long-term capital gains and losses if the Investor's Section 1231
gains exceed the Investor's Section 1231 losses for the year. However, net
Section 1231 gains will be treated as ordinary income to the extent of
unrecaptured net Section 1231 losses of the Investor for the five most recent
prior years. If the Investor's share of Section 1231 losses, when added to his
or her other Section 1231 losses, exceeds the Investor's Section 1231 gains for
the taxable year, such losses will be treated as ordinary losses.

     Section 1254 provides that upon disposition of any oil and gas property by
the Fund, a portion of any gain may be taxed as ordinary income from the
recapture of intangible drilling and development costs and depletion. The amount
that will be taxable as ordinary income will be equal to the lesser of: (1) the
amount of intangible drilling and development costs and depletion previously
deducted with respect to the property or interest sold (only insofar as they
reduced the adjusted basis thereof); or (2) the excess of the amount realized on
disposition of the property over the adjusted basis of the property.

     Any gain on the sale or other disposition of equipment by the Fund will be
taxed as ordinary income to the extent of all depreciation deductions previously
claimed with respect to such equipment, with any excess being treated as Section
1231 gain. Similarly, gain on the sale of any building owned by the Fund will be
treated as ordinary income to the extent of any depreciation taken with respect
to such building in excess of straight-line depreciation. If, however, such
building has been held for one year or less, all depreciation will be recaptured
as ordinary income. In the case of a disposition of property in an installment
sale, any ordinary income under these recapture provisions is to be recognized
in the year of the disposition.


                                       65


     Under Section 751, a similar recapture rule applies upon the disposition of
Shares by an Investor such that an Investor will be required to treat as
ordinary income the portion of any gain realized upon the disposition of the
Investor's Shares that is attributable to property subject to recapture of
depreciation, intangible drilling and development costs and depletion or certain
other property which, if sold by the Fund, would give rise to ordinary income.
There are exceptions to the recapture rules for gifts, transfers at death,
transfers in certain tax-free reorganizations, like-kind exchanges and
involuntary conversions in certain circumstances.

     Net capital gains of individual taxpayers currently are taxed at a
statutory rate (generally 15% for capital assets held for more than 12 months)
which is significantly less than the maximum statutory rate applicable to other
income (35%). Net capital gains means the excess of net long-term capital gain
over net short-term capital loss.

21.  Limitations on Interest Deductions

     In general, Section 163(d) limits the amount of investment interest which
an individual Investor may deduct to the Investor's "net investment income."
Interest expense (and income) from activities subject to the passive loss rules
is not treated as investment interest (or investment income). Investment
interest includes interest attributable to indebtedness that is incurred to
acquire an interest in an activity involving the conduct of a trade or business
which is not a passive activity and in which the taxpayer does not materially
participate. Interest attributable to borrowing incurred to purchase Shares will
be taken into account in computing the Investor's income or loss from passive
activities to the extent that the Fund's income is treated as derived from a
passive activity. Consequently, most of the interest expense attributable to
such borrowing should not constitute investment interest expense. Investment
interest, the deduction of which is disallowed in any year, may be carried over
to subsequent years. Each Investor should consult with the Investor's own tax
advisor as to the application, if any, to the Investor of the limitations
contained in Section 163(d).

     In addition, under the Code, no deduction is allowed for personal interest
(such as interest on car loans or credit card balances for personal
expenditures). Interest on underpayments of tax (other than certain deferred
estate taxes) is treated as personal interest under the Code.


                                       66


     Interest on debt secured by the principal residence or second residence of
a taxpayer is, however, deductible if paid with respect to "acquisition
indebtedness" up to a maximum debt of $1,000,000 ($500,000 for a married person
filing a separate return) and "home equity indebtedness" up to a maximum debt of
$100,000 ($50,000 for a married person filing a separate return). For this
purpose, "acquisition indebtedness" means debt that is incurred in acquiring,
constructing or substantially improving the principal or a second residence of
the taxpayer and "home equity indebtedness" means debt secured by the taxpayer's
principal or second residence to the extent that the aggregate amount of such
debt does not exceed the difference between the "acquisition indebtedness" with
respect to the residence and the fair market value of the residence. Under the
Code, interest on certain pre-October 13, 1987 indebtedness of the taxpayer is
deductible regardless of the $1,000,000 and $100,000 limitations.

     In addition to the foregoing, Section 265(a)(2) provides that interest on
indebtedness incurred or continued to "purchase or carry" tax-exempt securities
is not deductible. Investors who currently own or anticipate acquiring
tax-exempt securities and who contemplate purchasing Shares with borrowed funds
are urged to consult with their tax advisors with respect to the application of
Section 265.

22.  Fund Elections

     Pursuant to Sections 734, 743 and 754, a partnership may elect to have the
cost basis of its assets adjusted in the event of a sale by a partner of the
partner's interest in the partnership, the death of a partner, or the
distribution of property to a partner. The general effect of such an election is
that the transferees of an interest in the partnership are treated as though
they had acquired a direct interest in the partnership assets and, upon certain
distributions to partners, the partnership is treated as though it has newly
acquired an interest in the partnership assets and therefore acquired a new cost
basis for such assets. Any such election, once made, is irrevocable without the
consent of the Service.

     In cases where the Fund owns property with substantially higher cost basis
than its value, it may be required to make the basis adjustments as if a Section
754 election were in effect. Otherwise, as a result of the complexities and the
substantial expense inherent in making the election, the Manager does not
presently intend to make such an election on behalf of the Fund. The absence of
any such election may result in a reduction in value of an Investor's Shares to
any potential transferee. Thus, the absence of the power to compel the making of
such an election should be considered an additional impediment to the
transferability of Shares.


                                       67


     Various other elections affecting the computation of federal income tax
deductions and taxable income derived from the Fund must be made by the Fund and
not by the individual Investors. For purposes of reporting each Investor's share
of Fund income, gains and losses, the Fund's elections are binding upon the
Investors.

23.  At Risk Rules: Limitation on Deduction of Losses

     Section 465 limits an Investor's deduction for losses allocated to the
Investor by the Fund to the amount that he has at risk with respect to the Fund.
The term "loss" is defined as the excess of the deductions allowable for the
taxable year over the income received or accrued by the taxpayer during the
taxable year from such activity.

     Section 465 and the proposed Regulations thereunder generally provide that
an Investor will be considered to have at risk in the Fund the sum of (i) the
amount of money contributed to the Fund, (ii) the adjusted basis of other
property contributed to the Fund, (iii) income generated by the Fund, and (iv)
amounts borrowed by the Investor or the Fund for use in the Fund's activities,
where the Investor is personally liable for the repayment of the loan or where
the Investor has pledged property, other than property used in the activity, as
security for the borrowed amount, but only to the extent of the net fair market
value of the Investor's interest in the property; provided, however, that
borrowed amounts will not be considered at risk if borrowed from any person or
entity who (a) has an interest, other than as a creditor, in the Fund's
activities or (b) is related to someone who has such an interest. Thus, for
example, an Investor will not be considered to have at risk in the Fund amounts
borrowed from the Manager or its Affiliates. An Investor will not be considered
at risk with respect to amounts protected against loss through nonrecourse
financing, guarantees, stop loss agreements or other similar arrangements.

     Distributions to an Investor will generally reduce the amount which the
Investor has at risk in the activity. The "at risk" rules provide that the
amount of any distribution received by an Investor or any other reduction in the
Investor's at risk basis, after his or her amount at risk is reduced to zero,
will be treated as ordinary income, but only to the extent of losses previously
claimed by the Investor from the Fund. Thus, if the Fund makes distributions to
an Investor which do not exceed his adjusted basis in the Fund, but do exceed
the Investor's amount at risk, he may have ordinary income.


                                       68


     Generally, the at risk limitation applies on an activity-by-activity basis
and, in the case of oil or gas properties, each property is treated as a
separate activity so that losses or deductions arising from one property are
limited to the at risk amount for that property and not the aggregate at risk
amount for all the taxpayer's oil or gas properties. The Service has announced
that, until further guidance is issued, it will permit the aggregation of oil or
gas properties owned by a partnership in computing a partner's at risk
limitation with respect to the partnership. The Service has also announced that
any rules that would impose restrictions on the ability of partners to aggregate
will be effective only for taxable years ending after the rules are issued. If
an Investor must compute his at risk amount separately with respect to each Fund
Property, the consequences of the at risk limitations to him are unpredictable,
but he may not be allowed to utilize his share of losses or deductions
attributable to a particular Property even though he has a positive at risk
amount with respect to the Fund as a whole.

     If in any year an Investor has a loss from the Fund, the effect of Section
465(a) is to permit deduction of such loss up to the aggregate amount at risk on
the last day of the taxable year. If the amount at risk exceeds the loss, the
amount deemed at risk in subsequent years is reduced under Section 465(b)(5) by
the amount of losses claimed in previous years and increased by additional at
risk amounts contributed to the activity. If the amount of loss exceeds the at
risk amount, the excess loss is held in a suspense account and treated as a
deduction in the first succeeding taxable year that the taxpayer is at risk. The
carryover loss is then added to the deductions allowable for such year but is
limited at the end of such year by the amount then at risk. Under proposed
Regulation Section 1.465-2(b), there is no limitation on the number of years to
which such deductions may be carried.

     In addition to the "at risk" rules discussed above, Section 704(d) provides
that a partner's distributive share of partnership loss is allowed as a
deduction only to the extent of the positive adjusted basis of his partnership
interest at the end of the partnership year in which the loss is incurred. If a
partner's distributive share of loss items exceeds his basis, as adjusted for
capital contributions, distributions, the partner's share of any partnership
income items and changes in his share of partnership liabilities, then only a
portion of each loss item is allowed, based upon the portion that each bears to
the total of all loss items. Excess losses which are not currently allowed may
be carried forward indefinitely until such partner has sufficient basis to
permit the deduction.


                                       69


24.  Passive Activities

     Under the Code, deductions from passive activities, to the extent that they
exceed income from all such activities (exclusive of portfolio income),
generally will not be deductible against other income of the taxpayer. Thus, the
taxpayer cannot use passive losses to offset personal earnings, active business
income, or investment or portfolio income (such as interest, dividends,
royalties, or gains from the sale of assets that generate investment or
portfolio income). Similarly, credits from passive activities generally are
limited to the tax allocable to the passive activities. Suspended losses and
credits are carried forward and treated as deductions and credits from passive
activities in the next taxable year. When the taxpayer disposes of his entire
interest in an activity in a fully taxable transaction, any remaining suspended
loss incurred in connection with that activity is allowed in full.

     Passive activities are defined to include trade or business activities in
which the taxpayer does not materially participate and rental activities.
Interest attributable to passive activities is not treated as investment
interest.

     The passive loss provision generally applies to individuals, estates,
partnerships, and personal service corporations (as defined for purposes of the
provision). Certain closely held corporations are subject to a more limited rule
under which passive losses and credits may not be applied to offset portfolio
income.

     Ownership of Shares will be a passive activity and an Investor will be
subject to the passive activity loss limitations with respect to his share of
the Fund's losses and deductions. Consequently, an Investor's share of the
Fund's losses and deductions may be deducted only to the extent of his share of
the Fund's income and any income from other passive activities.

     A special provision of the passive activity rules applies to publicly
traded partnerships. If this special provision were to apply to the Fund,
certain additional limitations would apply, the most significant of which is
that an Investor could only deduct his share of Fund losses and deductions
against his share of passive activity income from the Fund. The definition of
"publicly traded partnership" for purposes of this special provision is the same
as the definition of "publicly traded partnership" discussed under
Classification as a Partnership above, except that this special provision does
not include the 90% of gross income exception.


                                       70


25.  Investment by Qualified Plans and Other Tax Exempt Entities

     In General. The following entities are generally exempt from federal income
taxation:

     o    trusts forming part of a stock bonus, pension, or profit sharing plan
          (including a Keogh plan) meeting the requirements of Section 401(a);

     o    trusts meeting the requirements for an Individual Retirement Account
          ("IRA") under Section 408(a) (referred to herein, along with trusts
          described in (A), as "Qualified Plans"); and

     o    organizations described in Sections 501(c) and 501(d) (collectively
          with Qualified Plans "Tax Exempt Entities").

     This exemption does not apply to the extent that taxable income is derived
by the above entities from the conduct of any trade or business which is not
substantially related to the exempt function of the entity ("unrelated business
taxable income"). If an entity is subject to tax on its "unrelated business
taxable income," it may also be subject to the alternative minimum tax on
related tax preference items.

     In the case of a charitable remainder trust, the receipt of any "unrelated
business taxable income" during any taxable year will cause all income of the
trust for that year to be subject to federal income tax. Therefore, an
investment in the Fund by a charitable remainder trust would not ordinarily be
appropriate. In some circumstances, however, taxability under the ordinary trust
rules may not be disadvantageous to a charitable remainder trust.

     "Unrelated business taxable income" is generally taxable only to the extent
that the Tax Exempt Entity's "unrelated business taxable income" from all
sources exceeds $1,000 in any year. The receipt of "unrelated business taxable
income" by a Tax Exempt Entity in an amount less than $1,000 per year will,
however, require the Tax Exempt Entity (except an IRA) to file a federal income
tax return to claim the benefit of the $1,000 per year exemption. Fiduciaries of
Tax Exempt Entities considering investing in Shares are urged to consult their
own tax advisors concerning the rules governing "unrelated business taxable
income."

     Gains or losses from the sale, exchange or other disposition of property,
interest income and royalty income are generally excluded from the computation
of "unrelated business taxable income." "Unrelated business taxable income"
includes, however, gain or loss from the sale, exchange or other disposition in
the ordinary course of the seller's business and "debt-financed property."


                                       71


     Although some of the Fund's income may be treated as royalty income, a
significant portion of the Fund's income will be considered to be derived from
sales in the ordinary course of business. Thus, Tax Exempt Entities should
expect a significant portion of the income derived from their investment in the
Fund to constitute "unrelated business taxable income."

     B. Debt-Financed Property. Even though certain types of income, such as
interest and royalties, generally may be considered passive and excluded from
unrelated business income tax, such income when derived from an investment in
property which is "debt-financed" can still result in income subject to
taxation. "Debt-financed property" is defined in the Code as any property which
is held to produce income and with respect to which there is "acquisition
indebtedness." "Acquisition indebtedness" includes indebtedness incurred by a
Tax Exempt Entity to acquire Shares and indebtedness incurred by the Fund. Each
Tax Exempt Entity should consult with its own counsel regarding whether it may
have incurred "acquisition indebtedness" to acquire Shares.

     In the event the Fund invests in and owns property on which there is
"acquisition indebtedness," a portion of each Tax Exempt Entity's distributive
share of the Fund's taxable income (including capital gain) may constitute
"unrelated business taxable income." This portion would be determined in
accordance with the provisions of Section 514 and is the portion of the Tax
Exempt Entity's distributive share of Fund income which is approximately
equivalent to the ratio of the Fund's debt to the basis of the Fund's property.
Therefore, a Tax Exempt Entity that purchases Shares may be required to report
such portion of its pro rata share of the Fund's taxable income as "unrelated
business taxable income." It should be noted that in computing the "unrelated
business taxable income" of a Tax Exempt Entity for this purpose, the deduction
for depreciation is limited to the amount computed under the straight-line
method.

     The Fund is likely to incur "acquisition indebtedness" in its operations
which is allocable to any Tax Exempt Entity, thus resulting in "unrelated
business taxable income" to such entity.

     C. ERISA Considerations. In considering an investment in Shares,
fiduciaries of Qualified Plans should consider (i) whether the investment is in
accordance with the documents and instruments governing such Qualified Plan,
(ii) whether the investment satisfies the diversification requirements of


                                       72


Section 404(a)(1)(C) of the Employee Retirement Income Security Act of 1974
("ERISA"), if applicable; (iii) the fact that the investment may result in
"unrelated business taxable income" to the Qualified Plan (including IRAs and
Keogh plans); (iv) whether the investment provides sufficient liquidity; (v)
their need to value the assets of the Qualified Plan annually; and (vi) whether
the investment is prudent.

     ERISA generally requires that the assets of employee benefit plans be held
in trust and that the Manager, or a duly authorized investment manager (within
the meaning of Section 3(38) of ERISA), have exclusive authority and discretion
to manage and control the assets of the plan. ERISA also imposes certain duties
on persons who are fiduciaries of employee benefit plans subject to ERISA and
prohibits certain transactions between an employee benefit plan and the parties
in interest with respect to such plan (including fiduciaries). Under the Code,
similar prohibitions apply to all Qualified Plans, including IRAs and Keogh
plans covering only self-employed individuals which are not subject to ERISA.
Under ERISA and the Code, any person who exercises any authority or control
respecting the management or disposition of the assets of a Qualified Plan is
considered to be a fiduciary of such Qualified Plan.

     Furthermore, ERISA and the Code prohibit "parties in interest" (including
fiduciaries) of a Qualified Plan from engaging in various acts of self-dealing
such as dealing with the assets of a Qualified Plan for his own account or his
own interest. To prevent a possible violation of these self-dealing rules,
neither the Manager nor their Affiliates will purchase Shares with assets of any
Qualified Plan (including a Keogh plan or IRA) if they (i) have investment
discretion with respect to such assets or (ii) regularly give individualized
investment advice which serves as the primary basis for the investment decisions
with respect to such assets.

     If the assets of the Fund were deemed to be "plan assets" under ERISA, (i)
the prudence standards and other provisions of Title 1 of ERISA applicable to
investments by Qualified Plans and their fiduciaries would extend (as to all
plan fiduciaries) to investments made by the Fund and (ii) certain transactions
that the Fund might seek to enter into might constitute "prohibited
transactions" under ERISA and the Code.

     The Department of Labor has published a final regulation concerning the
definition of what constitutes the assets of a Qualified Plan with respect to
its investment in another entity (the "ERISA Regulation"). Section
2510.3-101(a)(2) of the ERISA Regulation provides as follows:


                                       73


     "Generally, when a plan invests in another entity, the plan's assets
     include its investment, but do not, solely by reason of such investment,
     include any of the underlying assets of the entity. However, in the case of
     a plan's investment in an equity interest of an entity that is neither a
     publicly-offered security nor a security issued by an investment company
     registered under the Investment Company Act of 1940 its assets include both
     the equity interest and an undivided interest in each of the underlying
     assets of the entity, unless it is established that (i) The entity is an
     operating company, or (ii) Equity participation in the entity by benefit
     plan investors is not significant."

     Under Section 2510.3-101(f)(1) of the ERISA Regulation, equity
participation in an entity by Qualified Plans is "significant" on any date if,
immediately after the most recent acquisition of any equity interest in an
entity, 25% or more of the value of any class of equity interests in the entity
is held by Qualified Plans.

     Unless another exemption under the Regulation is available, the Manager
will not admit any Qualified Plan as an Investor or consent to an assignment of
Shares if such admission or assignment will cause 25% or more of the value of
any class of Fund Shares to be held by Qualified Plans. Accordingly, the assets
of a Qualified Plan investing in the Fund should not, solely by reason of such
investment, include any of the underlying assets of the Fund.

     Each fiduciary of a Qualified Plan (and any other person subject to ERISA)
should consult his tax advisor and counsel regarding the effect of the plan
asset rules on an investment in the Fund by a Qualified Plan.

26.  Partnership Anti-Abuse Regulations

     Treasury Regulation section 1.701-2(b) provides, inter alia, that: "...if a
partnership is formed or availed of in connection with a transaction a principal
purpose of which is to reduce substantially the present value of the partners'
aggregate federal tax liability in a manner that is inconsistent with the intent
of subchapter K, the Commissioner can recast the transaction for federal tax
purposes, as appropriate to achieve tax results that are consistent with the
intent of subchapter K, in light of the applicable statutory and regulatory
provisions and the pertinent facts and circumstances." Subchapter K is the
section of the Code which deals with partnership taxation. The Fund does not
intend to enter into any transactions which it believes will be subject to
recasting by the Service under the authority of this Regulation. Due to the


                                       74


extremely broad language of the Regulation, however, and varying interpretations
of the intent of subchapter K, no assurance can be given that the Service will
not attempt to apply the Regulation to one or more transactions engaged in by
the Fund.

27.  Possible Changes in Tax Laws

     The statues, regulations and rules with respect to all of the foregoing tax
matters are constantly subject to change by Congress or by the Department of the
Treasury, and the interpretations of such statutes, regulations and rules may be
modified or affected by judicial decision or by the Department of the Treasury.
Because significant amendments have been made to the Code in recent years and
few final regulations have been promulgated pursuant to such amendments and very
few rulings have been issued thereunder, and because of the continual changes
made by Congress, the Department of the Treasury and the courts with respect to
the administration and interpretation of the tax laws, no assurance can be given
that the foregoing opinions and interpretations will be sustained or that tax
aspects summarized herein will prevail and be available to the Investors.

28.  State and Local Taxes

     In addition to the federal income tax consequences described above,
prospective Investors should consider potential state and local tax consequences
of an investment in the Fund. In general, an Investor's distributive share of
the taxable income or loss of the Fund will be required to be included in
determining the Investor's reportable income for state or local tax purposes in
the jurisdiction in which he is a resident. In addition, some states in which
the Fund may do business or own properties impose taxes on non-resident
Investors determined with reference to their pro rata share of Fund income
derived from such state. Any tax losses derived through the Fund from operations
in such state may be available to offset only income from other sources within
the same state. To the extent that a non-resident Investor pays tax to a state
by virtue of Fund operations within that state, the Investor may be entitled to
a deduction or credit against tax owed to his state of residence with respect to
the same income. In addition, estate or inheritance taxes might be payable in
such jurisdictions upon the death of an Investor. Thus, an Investor might be
subject to income, estate or inheritance taxes and may be required to file tax
returns in states and localities where the Fund operates, as well as in the
state or locality of his residence.


                                       75


     Investors are urged to consult their own tax advisors in regard to the
state and local income tax consequences of an investment in the Fund.

29.  Need for Independent Advice

     The tax matters relating to the Fund and its proposed transactions are
complex and subject to various interpretations. The foregoing analysis is merely
a summary and is not intended as a complete discussion of all tax aspects of the
Fund's activities or as a substitute for careful tax planning. Each prospective
investor must consult with and rely upon his own tax counsel with respect to the
possible tax results of his investment in the Fund.

     Neither the Fund, the Manager, counsel nor professional advisors engaged by
or associated with any of them guarantee that the tax consequences contemplated
to be offered to the Investors as a result of the proposed investment will in
fact be available in whole or in part. Investors must look solely to and rely
upon their own advisors with respect to the tax consequences of their
investment.

30.  Conclusion

     Subject to the preceding discussion, it is Black & Associates' opinion that
the material federal income tax benefits, in the aggregate, anticipated from the
operation of the Fund more likely than not will be realized in substantial part
by Investors who are individual United States citizens and who acquire their
Interest for profit subject to the passive activity loss limitations of Section
469 of the Code. It should be noted that Black & Associates' opinion is not
binding upon the Service or the courts.


                     ADDITIONAL ASPECTS OF THE LLC AGREEMENT

     THE RIGHTS AND OBLIGATIONS OF THE MANAGER AND THE INVESTORS ARE GOVERNED BY
THE LLC AGREEMENT, A COPY OF WHICH IS ATTACHED HERETO AS EXHIBIT A. NO
PROSPECTIVE INVESTOR SHOULD SUBSCRIBE TO THE FUND WITHOUT FIRST THOROUGHLY
REVIEWING SUCH AGREEMENT. THE FOLLOWING IS ONLY A BRIEF SUMMARY OF CERTAIN
SIGNIFICANT PROVISIONS OF THE LLC AGREEMENT AND SHOULD NOT BE CONSIDERED AS A
COMPLETE DISCUSSION OF ALL OF THE PROVISIONS OF THE LLC AGREEMENT. SEE LLC
AGREEMENT - EXHIBIT A.


                                       76


     Accounting. The accounting period of the Fund will end on December 31 of
each year. The Fund will utilize the accrual method of accounting for the Fund's
operations on the basis used in preparing the Fund's federal income tax returns
with such adjustments as may be in the Fund's best interest.

     Books and Records; Reports. The Fund will keep appropriate records relating
to its activity. All books, records and files of the Fund will be kept at the
Manager's office at Great Neck, New York or at another site chosen by the
Manager which will either be its office in Ridgewood, New Jersey or the Fund's
principal office at 1314 King Street, Wilmington, Delaware. An independent
certified public accounting firm will prepare the Fund's federal income tax
returns as soon as practicable after the conclusion of each year. The Fund will
use its reasonable best efforts to obtain the information for those returns as
soon as possible and to cause the resulting accounting and tax information to be
transmitted to the Shareholders as soon as possible after receipt from the
accounting firm.

     Investors may receive periodic reports from the Manager as to the Fund's
activities and will receive as soon as practicable after the end of each year
the necessary federal and state income tax information.

     Governing Law. All provisions of the LLC Agreement will be construed
according to the laws of the State of Delaware except as may otherwise be
required by law in any other state. In addition, the LLC Agreement requires that
for any lawsuit or other action, except for arbitration, Shareholders consent to
personal jurisdiction of and venue in the Delaware courts.

     Mandatory Binding Arbitration. The LLC Agreement contains a provision that
requires all disputes arising under or with respect to the LLC Agreement, either
brought by the Manager or a Shareholder, to be submitted to binding arbitration
in New York, New York. Such arbitration shall be governed and conducted in
accordance with the rules of the American Arbitration Association; to the extent
such rules do not conflict with the express terms of the LLC Agreement's
arbitration provision. As a result, a Shareholder shall not be entitled to bring
an action in a court of law against the Manager or the Fund but shall be limited
only to submitting such claim to arbitration. The determination of the
arbitration panel is binding on both parties and cannot be appealed to a court
of law. In addition, the arbitration provision contains a "no class action"
clause, pursuant to which Shareholders will be prohibited from bringing or
certifying a class action, or consolidating such Shareholder's claim with those
of other similarly situated Shareholders. Thus, Shareholders are limited to


                                       77


submitting their own individual claims to arbitration. Shareholders should be
aware that notwithstanding this provision of the LLC Agreement, certain rights
under the federal Securities Law may be subject to waiver and, under such
circumstances, this provision may not apply.

     Control of LLC Operations. The powers vested in the Manager under the LLC
Agreement are broad. The Manager has full, exclusive and complete discretion in
the management and control of the affairs of the Fund and Investors have no
power to take part in the management of, or to bind, the Fund.

     The Fund's officers are appointed by the Manager and may be removed by it
at any time. Additionally, the Manager may authorize any sale, lease, pledge or
other transfer of substantially all of a Fund's assets without a vote of the
Investors.

     Amendments and Voting Rights. The Manager may amend the LLC Agreement
without notice to or approval of the holders of Investor Shares for the
following purposes: to cure ambiguities or errors; to conform the LLC Agreement
to the description in this Memorandum; to equitably resolve issues arising under
the LLC Agreement so long as similarly situated Investors are not treated
materially differently; to comply with law; to make other changes that will not
materially and adversely affect any Investor's interest; to maintain the federal
income tax status of the Fund or any Shareholder, as long as no Investor's
liability is materially increased; or to make modifications to the computation
of items affecting the Investors' capital accounts to comply with the Code or to
reflect the creation of an additional class or series of Shares and the terms
thereof.

     Other amendments to a Fund's LLC Agreement may be proposed either by the
Manager or by Fund Investors either by calling a meeting of the Shareholders or
by soliciting written consents. The procedure for such meetings or solicitations
is found at Section 15.2 of the Fund's LLC Agreement. Such proposed amendments
require the approval of Investors who hold of record at least a majority of the
total Investor Shares on the record date for the action, given at a meeting of
Shareholders or by written consents. Any amendment requiring Investor action
(other than an amendment to allow the Fund to be taxed other than as a
partnership) may not increase any Shareholder's liability, change the Capital
Contributions required of him or her or his or her rights in interest in the
Fund's Profits, Losses, deductions, credits, revenues or distributions in more
than a de minimis matter, or change his or her rights on dissolution or any
voting rights without the Shareholder's consent. Any amendment which changes the


                                       78


Manager's management rights requires its consent. Generally, Investors have no
right to vote on matters not involving an amendment to the LLC Agreement or the
removal of the Manager. However, if any other matter does require a vote of
Investors, it must be approved by Investors who own of record at least a
majority of the total Investor Shares, or if a different vote is required by
law, each Investor will have voting rights equal to his or her total Investor
Shares for purposes of determining the number of votes cast or not cast.

     For all purposes, a majority of the Investor Shares is a majority of the
issued and outstanding shares, including those owned, if any, by the Manager or
its Affiliates. A majority of the shares voted is insufficient if it is less
than a majority of the outstanding shares.

     The consent of all holders of Investor Shares is required for dissolving or
terminating a Fund, other than as provided by the LLC Agreement; or adding a new
Manager except as described below.

     Removal of Manager. Investors may propose the removal of the Manager,
either by calling a meeting or soliciting consents in accordance with the terms
of the LLC Agreement. Removal of the Manager requires the affirmative vote of
Investors who are holders of record of at least a majority of the total Investor
Shares. See "Fiduciary Responsibilities of Manager" for information on the
effect of votes cast by interested Shareholders. Removal of a Manager causes a
dissolution of the Fund unless a majority of the Investor Shares elects to
continue the Fund. The Investors may replace the removed Manager or fill a
vacancy by vote of Investors who hold of record a majority of the total Investor
Shares.

     If the Manager is removed, resigns (other than voluntarily without cause)
or is unable to serve, it may elect to exchange its management rights and rights
to distributions, if any, for a series of cash payments from the Fund in amounts
equal to the amounts of distributions to which the Manager would otherwise have
been entitled under the LLC Agreement in respect of investments made by the Fund
prior to the date of any such removal, resignation or other incapacity. The
removed Manager would continue to receive its pro rata share of all allocations
to Investors as provided in the LLC Agreement which are attributable to any
Investor Shares owned by it.

     Alternatively, the removed Manager may elect to engage a qualified
independent appraiser and cause the Fund to engage another qualified independent
appraiser (at the Fund's expense in each case) to value the Fund Property as of
the date of such removal, resignation or other incapacity as if the property had


                                       79


been sold at its fair market value so as to include all unrealized gains and
losses. If the two appraisers cannot agree on a value, they would appoint a
third independent appraiser (whose cost would be borne by the Fund) whose
determination, made on the same basis, would be final and binding.

     Based on the appraisal, the Fund would make allocations to the removed
Manager's capital account of Profits, Losses and other items resulting from the
appraisal as of the date of such removal, resignation or other incapacity as if
the Fund's fiscal year had ended, solely for the purpose of determining the
Manager's capital account. If the removed Manager has a positive capital account
after such allocation, the Fund would deliver a promissory note of the Fund to
the Manager, the principal amount of which would be equal to the Manager's
capital account and which would bear interest at a rate per annum equal to the
prime rate in effect at Chase Manhattan Bank, N.A. on the date of removal,
resignation or other incapacity, with interest payable annually and unpaid
principal payable only from 25% of any available cash before any distributions
thereof are made to the Investors under the LLC Agreement.

     If the capital account of the removed Manager has a negative balance after
such allocation, it would be obligated to contribute to the capital of the Fund
in its sole discretion either cash in an amount equal to the negative balance in
its capital account or a promissory note to the Fund in such principal amount
maturing five years after the date of such removal, resignation or other
incapacity, bearing interest at the rate specified above. If the removed Manager
chose to elect the appraisal alternative, its entire interest in the Fund would
be terminated other than the right to receive the promissory note and payments
thereunder as provided above.

     Dissolution of Fund. The Fund will dissolve on the earliest to occur of (a)
December 31, 2045, (b) the sale of substantially all of the Fund's Property, (c)
the removal, dissolution, resignation, insolvency, bankruptcy, death or other
legal incapacity or disqualification of the Manager, (d) the vote of either all
Investors or of the Manager and Investors who own at least a majority of the
Investor Shares of record or (e) any other event requiring dissolution by law.
The Fund will wind up its business after dissolution unless (i) the Manager and
Investors who own at least a majority of the Investor Shares of record or (ii)
if there is no Manager, Investors who own at least a majority of the Investor
Shares of record, elect to continue the Fund. The Manager (or in the absence
thereof, a liquidating trustee chosen by the Investors) will liquidate the
Fund's assets if it is not continued.


                                       80


     Transferability of Interests. No Investor may assign or transfer all or any
part of his or her interest in the Fund and no transferee will be deemed a
substituted Investor or be entitled to exercise or receive any of the rights,
powers or benefits of an Investor other than the right to receive distributions
attributable to the transferred interest unless (i) such transferee has been
approved and accepted by a Fund, in its sole and absolute discretion, as a
substituted Investor, and (ii) certain other requirements set forth in the
Fund's LLC Agreement have been satisfied. The Fund and Manager retain the right
to deny or place conditions on any such transfer if the Fund or Manager believe
that such transfer would be in violation of applicable federal or state
securities laws or impose reporting obligations upon the Fund.

     The Manager may not resign except for cause (which cause does not include
the fact or determination that continued service would be unprofitable to it)
and may not transfer its interest in a Fund except to pledge it as security for
a loan to the Manager if the pledge does not reduce cash flow distributable to
other Shareholders, or to waive compensation and fees payable to it under the
LLC Agreement.

     The Manager's Capital Account. The Manager is obligated under the LLC
Agreement to restore any deficit in its capital account prior to any liquidating
distribution by a Fund. The Manager reserves the right, however, to offset this
obligation by waiving all or a portion of its rights to a distribution of any
fees or other compensation due it under the Fund's LLC Agreement.

                                    LIABILITY

     Assuming compliance with the LLC Agreement and applicable formative and
qualifying requirements in Delaware and any other jurisdiction in which a Fund
conducts its business, an Investor generally will not be personally liable under
Delaware law for any obligations of the Fund, except to the extent of any unpaid
Capital Contributions, except for the amount of any wrongful distributions that
render the Fund insolvent and except for indemnification liabilities arising
from any misrepresentation made by him or her in the Investor Subscription
Booklet (separately bound as Exhibit D to this Memorandum) submitted to the
Fund.

     The law governing whether a jurisdiction other than Delaware will honor the
limitation of liability extended under Delaware law to the Investors is
uncertain. All states have adopted specific legislation permitting limited
liability companies to limit the liability of their members and it is likely
that those states would similarly honor a Fund's limitations on liability of


                                       81


Investors. In many states, there has been no authoritative judicial
determination as to whether the limitation of liability would be honored.
However, regardless of the local treatment of LLC's, the Fund believes, although
it can not guarantee, that the Investors will not be subject to personal
liability and that with regard to the operation of a Fund itself, the limitation
of Investors' liability under Delaware law will govern. Investors should be
aware, however, that notwithstanding anything contained herein regarding
Investor liability, Investors maybe required to return distributions made to
them by the Fund if, within a certain period of time after such distribution the
Fund becomes insolvent.

     BY SIGNING THE SUBSCRIPTION AGREEMENT (EITHER IN PERSON OR BY THEIR
REPRESENTATIVES) AND ENGAGING TO PAY THE PRICE OF SHARES, AN INVESTOR BECOMES
BOUND BY THE PROVISIONS OF HIS OR HER FUND'S LLC AGREEMENT AT THE TIME HIS OR
HER SUBSCRIPTION IS ACCEPTED BY THE FUND, EVEN THOUGH HE OR SHE DOES NOT SIGN
THE LLC AGREEMENT.

                                OTHER INFORMATION

General

     The Fund undertakes to make available to each prospective Investor or his
purchaser representative, or both, during the course of the transaction and
prior to sale, the opportunity to ask questions of and receive answers from the
Fund or any person acting on its behalf relating to the terms and conditions of
the offering and to obtain any additional information necessary to verify the
accuracy of information made available to such purchaser. Prospective Investors
may only rely on information provided to them in writing and signed by the Fund.

     Prior to making an investment decision respecting the securities described
herein, a prospective Investor should carefully review and consider this entire
Memorandum and the exhibits thereto including without limitation the LLC
Agreement. Prospective Investors are urged to make arrangements with the Fund to
inspect any books, records, contracts, or instruments referred to in this
Memorandum and other data relating thereto. The Fund is available to discuss
with prospective Investors any matter set forth in this Memorandum or any other
matter relating to the securities described herein, so that Investors and their
advisors, if any, may have available to them all information, financial and
otherwise, necessary to formulate a well-informed investment decision.


                                       82


Authorized Sales Material

     Sales material may be used in connection with the Offering of the Shares
only when accompanied or preceded by the delivery of this Memorandum. Only sales
material that indicates that it is distributed or approved by the Fund or the
Placement Agent may be distributed to prospective Investors. In addition, the
Fund or the Placement Agent may distribute a summary of the Offering containing
highlights or other summary information concerning the Offering, information
regarding the Manager, a particular project, the Fund or other investment
programs sponsored by the Manager or one of its Affiliates. All such additional
sales material will be signed by or otherwise identified as authorized by the
Fund. Any other sales material or information has not been authorized for use by
the Fund or the Placement Agent and must be disregarded by Investors.

     All authorized sales material will be consistent with this Memorandum, as
supplemented. Nevertheless, sales material by its nature does not purport to be
a complete description of this Offering and Investors must review this
Memorandum and supplements carefully for a complete description of the Offering.
Authorized sales material should not be considered to be the basis for the
Offering of Shares or an Investor's decision to purchase Shares. Sales material
is not a part of this Memorandum and is not incorporated by reference into this
Memorandum unless expressly stated in this Memorandum or supplements hereto.

     INVESTORS MAY NOT RELY ON ORAL STATEMENTS MADE BY BROKER-DEALERS,
REGISTERED REPRESENTATIVES, OR OFFICERS OR EMPLOYEES OF THE MANAGER OR THE FUND.

                                  LEGAL MATTERS

     The validity of the issuance of the Shares offered hereby is being passed
upon for the Manager by Black & Associates, 350 Fifth Avenue, Suite 6710, New
York, New York 10118. Such firm has acted as special counsel to the Manager and
will not represent or advise the Fund or any prospective Investor in connection
with this Offering. THEREFORE, EACH PROSPECTIVE INVESTOR SHOULD CONSULT THE
INVESTOR'S OWN LEGAL, TAX AND INVESTMENT COUNSEL.

     Copies of Black & Associates' opinion as to the validity of the issuance of
the Shares and its opinion regarding the tax aspects of an investment in the
Fund may be obtained by writing to the Fund.


                                       83


     Black & Associates' representation of the Manager has been limited to
matters specifically addressed to it. No Investor should assume that Black &
Associates has in any manner investigated the merits of an investment in the
Shares, or undertaken any role other than reviewing items specifically referred
to it with regard to the preparation of this Memorandum and the issuance of the
opinions.

                        LITIGATION AND OTHER PROCEEDINGS

     The Fund is not a party to any pending legal proceeding. Prior proceedings
affecting the Manager or its Affiliates follow.

     In April 2002 Ridgewood Securities Corporation received notice from the
NASD of a proposed disciplinary action citing the failures by Mr. Swanson and
its other principal to complete a continuing education requirement on time. On
June 10, 2002, Ridgewood Securities Corporation accepted and paid the proposed
penalty of $7,500. The omissions had no effect on any Ridgewood investment
program or investors.

     There have been no legal proceedings commenced against Ridgewood Energy,
Robert E. Swanson or any of their affiliates as to any Ridgewood Energy program
offered in 1990 or in subsequent years. However, there were several lawsuits
filed with respect to Ridgewood Energy Funds formed from 1986 through 1989. As
described below, those suits were settled (in one case) or dismissed by the
court (in all other cases). There is no pending litigation as to Funds offered
in the 1980s. There has been no litigation on any Ridgewood Energy Fund offered
after 1990.

     In 1995, another plaintiff's attorney commenced an action against Ridgewood
Energy, Mr. Swanson and others in the U.S. District Court for the District of
New Jersey alleging a variety of the claims described above, named Gunter, et
al. v. Ridgewood Energy Corp., et al. (the "Gunter Case"). The complaint in the
Gunter Case alleged claims arising out of the 1994 sale of the assets of certain
Ridgewood Energy oil and gas programs to Apache Corporation. On December 4, 1995
the judge hearing the case entered an order which certified the Gunter Case as a
"class action," thereby permitting plaintiffs to represent a "class"' consisting
of the investors in the 1986 through 1989 Ridgewood Energy oil and gas programs
which participated in the sale of assets to Apache Corporation. After extensive
pre-trial discovery and motion practice, the parties agreed in June 1999 to a
settlement of the action in which, inclusive of attorneys' fees, Ridgewood
Energy Corporation and Mr. Swanson paid the class a total of $5 million in five
annual installments beginning in June 1999. All such installments have been
paid. The court considered and approved the fairness of the settlement in
September 1999.


                                       84


     On April 24, 1996, a group of 31 investors in various Ridgewood Energy oil
and gas programs commenced an action in the New Jersey Superior Court against
Ridgewood Energy Corporation, Ridgewood Securities Corporation and Robert E.
Swanson alleging common law fraud, negligent misrepresentation and breach of
fiduciary duty in connection with the sale of securities in those programs
between 1986 and 1990. No specific damages were claimed. Most of the plaintiffs
in this lawsuit were plaintiffs in the lawsuit described above and it
essentially restated the allegations of that 1991 lawsuit. The lawsuit was
dormant from June 1996 to September 1997, when the court dismissed it without
prejudice because the plaintiffs had not pursued the lawsuit.

     Described below are proceedings which do not involve Ridgewood Energy, but
involve Ridgewood Renewable Power, or Ridgewood Capital, both of which were also
founded by, and controlled by Robert E. Swanson. Ridgewood Renewable Power plus
Ridgewood Capital have invested in dozens of different businesses, and lawsuits,
many of them frivolous, are a part of doing business in this litigious age.

     In addition to routine litigation occurring in the ordinary course of the
management of the Ridgewood Renewable Power Programs ("Power Programs"),
Ridgewood Renewable Power and two of the Power Programs were sued by seven
individuals alleging that a registered representative of a broker-dealer not
affiliated with Ridgewood Renewable Power had made false statements to them and
to Ridgewood Power on their behalf in connection with the sale of interests in
the Power Programs, but that Ridgewood Renewable Power nonetheless benefited
from and is responsible for the representative's actions. Plaintiffs also sued
the registered representative's employer and seven issuers, none of whom are
affiliated with Ridgewood Power, whose securities were also sold by the
registered representative to plaintiffs. During 2001 and in January 2002, the
United States District Court for the District of Maryland and the Maryland trial
courts gave summary judgment in favor of Ridgewood Renewable Power and the two
Power Programs in all of these cases except for the last case, which was
dismissed voluntarily by the plaintiff. All appeals periods have expired and the
judgments in favor of Ridgewood Renewable Power are final.

     On August 4, 2001, NetHorsepower, Inc., a Portfolio Company owned by the
two Ridgewood Capital Venture Partners II programs, brought suit against
Ridgewood Capital Management LLC and Ridgewood Horsepower, LLC (the holding


                                       85


company for the investment made by the Venture Partners II programs) alleging
breach of a contract and breach of fiduciary obligations. The claimed damages
are in excess of $5 million. The lawsuit was brought in the Superior Court of
California, Visalia County, but the defendants removed the case to the United
States District Court for the Eastern District of California and it was then
transferred to the United States District Court for the Northern District of
California on Ridgewood Capital's motion. On January 28, 2002, that court
dismissed Ridgewood Capital and all defendants with prejudice except for
Ridgewood Horsepower, LLC. Subsequently, the federal action was dismissed as to
Ridgewood Horsepower, LLC without prejudice, and a second action, naming
Ridgewood Capital, Ridgewood Horsepower, LLC and two individual Ridgewood
Capital associates was filed in Tulare County, California Superior Court, based
on the same set of operative facts. By stipulation, it was transferred to the
San Francisco County Superior Court. An amended compliant was filed, in which
after demurrers, the claims of certain individual plaintiffs' were dismissed and
the only remaining claim against Ridgewood Horsepower LLC alleges breach of
contract. There are also claims against the two Ridgewood Capital associates,
who are being defended by Ridgewood Capital, asserting breach of duty and
constructive fraud. A summary judgment motion is anticipated. Ridgewood
Horsepower has no assets other than its investment in NetHorsepower and thus
Ridgewood Capital believes that in its current form the lawsuit is not likely to
have a material impact on the Venture Partners II programs or Ridgewood Capital.
Recently, the case against Ridgewood Capital, as well as other Ridgewood
defendants, was dismissed. Plaintiffs are planning an appeal.

     On December 11, 2001, Ms. Jeanette Granat, the holder of five shares in
Ridgewood Venture Partners II LLC (one of the Venture Partners II programs),
brought a lawsuit in the United States District Court for the Southern District
of Florida against that program, Ridgewood Capital and the Placement Agent. Ms.
Granat had failed to make capital call payments and owed approximately 65% of
the amount due for the five shares she had purchased. She requested declaratory
and injunctive relief compelling that program to recognize her as the owner of
five full shares and to overrule forfeiture provisions of that program that have
deprived her of certain distributions and rights to proceeds because of her
capital call defaults. In addition, she complains of alleged breaches of
fiduciary duty and the program's limited liability company agreement by
Ridgewood Capital. Ridgewood Capital believes that the lawsuit is without merit
and is an attempt by Ms. Granat to avoid the consequences of her defaults.
Recently, Ridgewood Capital settled this case with Ms. Granat paying her
approximately $100,000 and agreeing to transfer a small percentage of Ridgewood
Capital's "back-end" participation rights with respect to Ridgewood Venture
Partners II LLC investment in SavaJe Technologies.


                                       86


     On July 23, 2002, Ridgewood Capital received notice that ACO Partners, LLC,
who had invested approximately $1 million in shares of GroupFire, Inc., a
portfolio company owned by the two Ridgewood Capital Venture Partners II
programs, had brought suit against Ridgewood Capital, the two funds, a former
consultant to the funds and Ridgewood GroupFire, LLC (the holding company for
the investment made by the Venture Partners II programs). The lawsuit alleged
breach of contract, fraud, breach of fiduciary duty and securities law
violations based on defendant's failure to provide additional capital to
GroupFire, Inc. and an alleged plan to prevent any other person from obtaining
control of the company. The Santa Clara County, California Superior Court
sustained two demurrers to the complaint, and on June 4, 2003, judgment was
entered in favor of the Ridgewood defendants and against plaintiff. All appeal
periods have expired and the judgment is final.

Financial Statements

     Since the Fund is newly formed and has acquired no assets and incurred no
liabilities, no financial statements are included for the Fund. A copy of the
unaudited financial statements of Ridgewood Energy Corporation as of December
31, 2004 and December 31, 2005 are attached hereto as Exhibit C.

                                   DEFINITIONS

     Whenever used in this Memorandum, the following terms shall have the
meanings set forth below, unless the context otherwise indicates. The singular
shall include the plural and the masculine gender shall include the feminine and
vice versa, as the context requires. In addition, the term "person" as used in
this Memorandum shall include natural persons and entities, including without
limitation, corporations, unless the context otherwise indicates.

ACT - The Securities Act of 1933, as amended, and any rules and regulations
promulgated thereunder.

ADDITIONAL CAPITAL CONTRIBUTIONS - Any capital contributions to the Fund made by
a Shareholder pursuant to Section 9.8 of the LLC Agreement.


                                       87


ADDITIONAL WELL ACTIVITIES - The drilling, developing, completing, equipping,
reworking or re-entering wells after the expenditure of the initial Capital
Contributions.

ADMINISTRATIVE AND OVERHEAD EXPENSES - The customary, routine and necessary
costs and expenses incurred by the Manager which are associated with or
attributable to administration of the business of the Fund, including, but not
limited to, an allocable portion of telephone, postage, computer service,
accounting and legal fees, regulatory reporting, and an allocable portion of
salaries and expenses of employees and officers of the Manager. Such expenses do
not include the direct expenses of the Fund such as legal, accounting and
consulting expenses.

AFFILIATE - An "affiliate" of, or person "affiliated" with, a specified person
is a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person
specified.

BLOCK - A numbered area of acreage, either on land or submerged in the Gulf of
Mexico, on an official diagram of leasing map which is auctioned off and leased
by the MMS for exploratory drilling and development.

CAPITAL CONTRIBUTIONS - The contributions of the Investors to the Fund. For all
purposes of this Memorandum, the Capital Contribution of each Investor shall be
$150,000 per Share (prorated for fractional or multiple Shares).

CARRIED INTEREST - Typically, a fractional Working Interest retained by the
seller of a Working Interest on the condition that the purchasers ratably pay
the portion of drilling costs for the first well otherwise attributable to the
Carried Interest.

CODE - The Internal Revenue Code of 1986, as amended from time to time.

DELAWARE ACT - The Delaware Limited Liability Company Act, as amended.

DRY-HOLE COSTS - The cost of drilling the well. Completion costs are in addition
to Dry-Hole costs but only come due if the well locates producible oil or gas.


                                       88


ESCROW DATE - The date on which the Fund has collected full payment for at least
10 Shares and has deposited those funds in the escrow account for this Offering.

FARMEE - The person who is assigned a Working Interest or portion thereof under
a Farm-out Agreement.

FARM-IN - Earning acreage in potential oil and natural gas properties under a
Farm-out Agreement.

FARMOR - Owner of a Working Interest already under lease who assigns all or a
portion of such interest under a Farm-out Agreement.

FARM-OUT - Assigning all or a portion of a Farmor's Working Interest in a lease
pursuant to a Farm-out Agreement.

FARM-OUT AGREEMENT - An agreement whereby the owner of the Working Interest
agrees to assign all or a portion of such interest in certain specific acreage,
subject to the drilling of one or more specific wells or other performance as a
condition of the assignment, and retains some interest such as an Overriding
Royalty Interest, an oil and natural gas payment, offset acreage or other type
of interest which may convert to a Working Interest after the drilling of an
initial well, the recoupment of costs of the assignee or some other event.

FUND - Ridgewood Energy S Fund, LLC, c/o Ridgewood Energy Corporation, 1010
Northern Boulevard, Suite 208, Great Neck, New York 11021.

FUND PROPERTY - All property owned or acquired by the Fund or on its behalf.

INTANGIBLE DRILLING COSTS - All expenditures made with respect to any well,
prior the establishment of production in commercial quantities, for wages, fuel,
repairs, hauling, supplies and other costs and expenses incident to an necessary
for the drilling of such well, which costs and expenses may be currently
deducted for federal income tax purposes pursuant to Section 263(c) of the Code
and Treasury Regulation Section 1.612-4(a).

INVESTOR - A purchaser of whole or fractional Shares.

LLC ACT - The Delaware Limited Liability Company Act, as amended.


                                       89


LIMITED LIABILITY COMPANY AGREEMENT or LLC AGREEMENT - The Limited Liability
Company Agreement, dated as of February 1,, 2006, by the Manager that
establishes the Fund and the rights and obligations of the Manager and the
Shareholders. A copy is annexed to this Memorandum as Exhibit A.

LOSSES - See "PROFITS or LOSSES," below.

MANAGING PERSONS - All of the following persons: the Manager, the Affiliates of
the Manager, and the directors, officers and agents of any of the foregoing when
acting on behalf of the Fund.

MANAGER - Ridgewood Energy Corporation or such substitute or different Manager
as may subsequently be admitted to the Fund pursuant to the terms of the LLC
Agreement.

MEMORANDUM - This Confidential Memorandum, dated January 2, 2006 may be amended
or supplemented from time to time.

MMS - The Minerals Management Service, an agent of the United State Department
of the Interior, that conducts the auctions of lease Blocks and provides general
oversight of the Interior Department's offshore programs.

NON-CONSENT INTEREST - Contractual ownership interests created out of existing
Working Interests under operating agreements, rather than an interest in the
entire lease on which the wells are to be located. They are called "non-consent"
because they are triggered when a Working Interest owner declines to supply
additional capital for the drilling of new wells or for other purposes. The
person who does supply that capital is granted a Non-Consent Interest in the new
well or other facility. Those Non-Consent interests will revert back to the
original Working Interest owners upon the recoupment by the owner of the
Non-Consent Interest of a penalty amount from the production attributable to the
non-consent interest. After such reversion, the Non-Consent Interest owner will
have no more ownership rights with respect to the reverted interest.

OCS - Outer Continental Shelf.

OCSLA - The Outer Continental Shelf Lands Act.

OPERATING AGREEMENT - The operating agreement among Working Interest owners,
including without limitation the Fund (or a joint venture in which such person
participates), and the Operator of wells which provides the terms and conditions
pursuant to which the Operator will conduct operations on jointly owned oil and
gas properties.


                                       90


OPERATING COSTS - The customary expenses incurred in connection with the
operation and maintenance of a well in which the Fund owns an interest and the
production and marketing of oil and natural gas therefrom, including delay
rentals, storage rental, or shut-in gas royalties paid with respect to the
leases, the costs of reworking or plugging and abandoning commercial wells, all
costs of gathering, treating, compressing and transporting oil and natural gas
and all severance, windfall profits, ad valorem and other taxes (other than
income taxes).

OPERATOR - Any person, Fund, corporation or other entity responsible for
conducting operations on jointly owned oil and gas operations for the account of
all Working Interest owners, usually pursuant to the terms of an Operating
Agreement.

ORGANIZATIONAL, DISTRIBUTION AND OFFERING EXPENSES - Expenses incurred by the
Manager for organizing the Fund and closing the offering, including without
limitation legal, accounting, engineering and geologic consulting fees, filing
and other expenses of organizing the Fund, distribution and selling costs, and
closing costs for the offering.

OVERRIDING ROYALTY INTEREST - A royalty interest carved out of the Working
Interest net of the landowner's royalty.

PLACEMENT AGENT - Ridgewood Securities Corporation, a Delaware corporation with
its principal office at 947 Linwood Avenue, Ridgewood, New Jersey.

PRODUCTIVE WELL - A producing well or a well capable of production whether or
not completed or currently shut in.

PROFITS or LOSSES - For a given period, the Fund's taxable income or loss,
respectively, as determined under the Code, adjusted as follows:

          any income of the Fund exempt from federal income tax and not
          otherwise taken into account in computing Profits or Losses and any
          income and gain described in Treasure Regulations Section
          1.704-1(b)(2)(iv)(g)(1) is added to taxable income or loss;

          any expenditures of the Fund described in Code Section 705(a)(2)(B) or
          treated as such under Treasure Regulations Section
          1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
          Profits or Losses are subtracted from taxable income or loss;


                                       91


          unrealized gain or loss on distributions in kind deemed to have been
          realized on the distributed property is added or subtracted,
          respectively, from taxable income or loss; and

          items specially allocated under Sections 4.4 and 7.4 of the LLC
          Agreement are not taken into account.

PROJECT - An area designated by the Manager in which the Fund owns or expects to
own one or more oil and natural gas interests and which the Manager reasonably
believe contains at least one reservoir of oil, natural gas or other
hydrocarbons.

REGULATIONS - The applicable Treasury Regulations promulgated under the Code.

RIDGEWOOD - Ridgewood Energy Corporation, a Delaware corporation wholly owned by
Robert E. Swanson that is the Manager of the Fund.

RIDGEWOOD ENERGY PROGRAM or PRIOR PROGRAM - One of the prior drilling and
completion limited partnerships or business trusts, or funds within those
limited partnerships, or one of the five Leasebank programs, or any other
program sponsored by Ridgewood and that have invested in the oil and gas
industry.

RIDGEWOOD SECURITIES - a Delaware corporation wholly owned by Robert E. Swanson
that will act as the Placement Agent for this offering.

ROYALTY - An interest in oil, natural gas or other minerals that entitles the
owner of the underlying real property to a specified fraction of production, in
kind or in value, free of the expense of development and operation, and which is
payable out of the leasehold interest after deduction of the cost of processing,
transporting and marketing such production.

SALVAGE FUND - A fund in the nature of a sinking fund established to provide for
funding anticipated salvage costs and other expenses incident to the shutdown of
wells, the removal of facilities and environmental rehabilitation, if required.

SERVICE - The Internal Revenue Service.


                                       92


SHAREHOLDER - A member of the Fund, including each Investor and Ridgewood.

SHUT-IN - To temporarily cease production from and operation of a well by
shutting the valves at the wellhead or nearby.

SUBSCRIPTION AGREEMENT - The form of agreement (contained in Exhibit D hereto,
which is separately bound) which each prospective Investor must execute in order
to subscribe for Shares in the Fund.

TERMINATION DATE - July 31, 2006 or such later date determined by the Manager as
permitted by and pursuant to the LLC Agreement.

SHARES - Beneficial interests in the Fund representing a Capital Contribution of
$150,000.

WORKING INTEREST - A Working Interest is an interest under an oil and natural
gas lease, which carries with it the obligation to pay the costs of such
operation. The holders of the entire Working Interest bear 100% of the costs of
exploring, drilling, developing and operating the lease and are entitled to
receive revenues derived from oil and natural gas production on such lease which
remain after deduction of the cost of processing, transporting and marketing
such oil and natural gas, Royalty payments, Overriding Royalty Interest payments
and other burdens on production.

EX-10.1

                                                                    EXHIBIT 10.1


    Chevron                     Gordon R. Cain      North America Upstream
[LOGO OMITTED]                  Land Manager        Gulf of Mexico Land Division
                                                    935 Gravier Street
                                                    New Orleans, LA 70112
                                                    Tel 504-592-6356
                                                    Fax 504-592-7110
                                                    GordonCain@chevron.com


November 1, 2006


Ridgewood Energy Corporation
11700 Old Katy Road, Suite 280
Houston TX, 77079

Attention: Mr. Greg Tabor

Participation Agreement
North Jaguar Prospect
OCS-G 13980, VIOSCA KNOLL BLOCK 207
Viosca Knoll Block 207 #2ST #2
Viosca Knoll Field
Offshore Alabama

Gentlemen:


This Participation Agreement ("PA"), when executed by each of the Parties
hereto, being Chevron U.S.A. Inc. ("Chevron") and Ridgewood Energy Corporation
("Ridgewood"), sometimes hereinafter referred to as the "Parties", will evidence
the agreement between the Parties to explore, develop and operate certain rights
in the "Contract Area", as defined below. The Parties hereby agree to the
following terms and conditions:

1. CONTRACT AREA.  The Contract Area is the leasehold acreage that covers the
     following described property:

     Viosca Knoll Block 207 (OCS-G 13980) as said lease covers depths down to
     and including the total depth of 99,999', hereinafter referred to as the
     "Contract Area." Chevron's interest in the Contract Area, to the best of
     our information and belief is set out as shown in Exhibit "A" attached
     hereto and is hereinafter referred to as the "North Jaguar Prospect".

2. COMMENCEMENT.   Subject to the other terms hereof, weather delay, delivery of
     materials, (e.g. pipe), rig availability and obtaining all requisite
     permits, which rig and permits Chevron shall use reasonable business-like
     efforts to obtain, Ridgewood hereby obligates itself to participate,
     subject to and under the Article 3 terms below, and, Chevron, as operator,
     must commence mobilizing the Ocean Drake drilling rig or mobilizing a
     drilling rig capable of drilling the Viosca Knoll Block 207 #2ST #2,
     hereinafter sometimes referred to as the "Initial Well", on or before
     November 22, 2006, as a development well, to be sidetracked, drilled and
     logged pursuant to certain terms of': the Operating Agreement ("OA"),
     attached hereto as Exhibit "B".




     The terms and provisions of the OA are incorporated herein as if set forth
     in full, are not intended to create any operating rights area in which
     Ridgewood owns an interest in the Contract Area and apply, prior to any
     earning by Ridgewood but, solely to recognize the rights, privileges and
     protections of Chevron as operator and for pre-earning notices, content and
     election periods and access by Ridgewood to the rig floor, but not
     otherwise. The costs, risks and expenses of the Initial Well are
     proportionately borne under this PA, and not the OA, until an earning by
     Ridgewood. Voting rights under this PA for operations shall require
     unanimous consent prior to earning, and a failure to reach unanimous
     consent shall be cause for the plugging and abandonment of the well by
     Chevron. Either party may propose abandonment at any time after reaching
     expenditure of one hundred and fifteen percent (115%) of the AFE. The
     Initial Well will be sidetracked, drilled and logged as per the final
     executed and approved Authority For Expenditure ("AFE") and well plan, as
     attached hereto as Exhibit "C", within the Contract Area, from a surface
     location of 7,329' FNL and 266' FEL on Viosca Knoll Block 206 OCS-G 10926
     (X = 1,266,927, Y = 10,811,390') to a bottom hole location for this
     proposed sidetrack being 7,598' FNL and 4,719' FWL of Viosca Knoll Block
     207 OCS-G 13980 (X = 1,271,912.76, Y = 10,811,120.46). The Initial Well
     shall be sidetracked, drilled and logged with due diligence and in
     accordance with good oilfield practice, at an estimated sub sea top of
     14,565', to the Lower Cretaceous Aptian 115 MYBD Middle James age carbonate
     formation, hereinafter referred to as the "Objective", and casing point
     shall occur when the Initial Well is side tracked, drilled and logged to
     the Objective. Subject to the other terms herein, sidetracking, drilling
     and logging operations will be conducted to casing point, and elections
     regarding subsequent operations after reaching the Objective will be made
     under and subject to the OA in the proportions prescribed under Exhibit "B"
     OA, with costs, risks and expense of such operations and ownership of and
     earning in the Contract Area governed by this PA prior to earning and by
     the OA after any earning.

3. PROSPECT WELL COST SHARING.   Chevron has proposed and Ridgewood has approved
     the sidetracking, drilling and logging of the Initial Well in the Contract
     Area as set forth in the attached Exhibit "C" ATE. By executing this PA and
     obligating itself to participate in the Initial Well, Ridgewood has the
     right to earn a forty percent (40%) working interest of the Chevron
     interest, proportionately reduced, in the Contract Area, upon meeting the
     obligations herein and in particular those set forth in Article 5 below for
     the Initial Well or Substitute Well, by paying seventy percent (70%) of the
     costs, to the extent applicable under this PA, of sidetracking, drilling
     and logging to the Objective, and/or plugging & abandoning, as a dry hole
     if applicable, of the Initial Well or Substitute Well, up to one hundred
     and fifteen percent (115%) of the costs in the attached Exhibit "C" AFE. If
     the Initial Well's actual cost exceeds the amount as set forth on the AFE
     by f fifteen percent (15%) or upon reaching the Objective, whichever occurs
     first, Ridgewood will thereafter pay and bear forty percent (40%) of the
     costs and risks of all subsequent operations in such well over such AFE
     cost for further drilling operations. However, notwithstanding anything to
     the contrary, if the Parties unanimously elect not to complete the Initial
     Well, whether or not reaching the Objective, but unanimously elect to plug


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 2



     and abandon the same, Ridgewood will pay and bear seventy percent (70%) of
     the costs and risks of such plugging and abandoning operations. The Parties
     agree that should a Substitute Well, as specified in Article 10, below, be
     approved by the Parties and commenced, Ridgewood's obligation to pay
     seventy percent (70%) of the AFE costs will cease at the point in time that
     the actual costs of the Initial Well plus the actual costs of the
     Substitute Well combined equal one hundred and fifteen percent (115%) of
     the AFE costs for the Initial Well; provided however, once the aggregate
     costs of the Initial Well and Substitute Well equal one hundred and fifteen
     percent (115%) of the costs of the total amount of the AFE for the Initial
     Well, Ridgewood's share of all subsequent drilling and operating costs will
     be forty percent (40%), subject to further rights, elections and provisions
     of this PA or the OA, as applicable. Effective upon and after reaching the
     Objective, but not before, the right to non-consent further or subsequent
     operations provided by the overexpenditure provision of the OA shall apply
     to subsequent operations. Prior to reaching the Objective, the Parties
     remain bound to the obligations of the PA, subject to the other terms of
     Article 2. It is the intention of the Parties, subject to Article 4 below,
     that the 1.75:1 promote borne by Ridgewood in favor of Chevron under the PA
     for the costs and risk of sidetracking, drilling and logging operations
     conducted under the PA shall end upon the earlier of earning, as detailed
     in Article 5 below, or the aggregate expenditure of one hundred and fifteen
     percent (115%) of the AFE cost.

4. REIMBURSEMENT OF ADDITIONAL PROMOTE. The Parties further agree that if the
     Initial Well or Substitute Well is completed as a successful well and
     produces 12 BCF gross of gas, then Chevron shall bill, and Ridgewood shall,
     within thirty days of such event, reimburse to Chevron, in one lump sum
     payment additional monies towards the sidetracking, drilling and logging
     operations cost conducted hereunder, plus jacket cost, the sum of the
     following: 1) an additional ten percent (10%) of the actual expended
     sidetracking, drilling and logging operations cost to the Objective, but
     not to exceed one hundred and fifteen percent (115%) of the AFE cost, and
     2) an additional forty percent (40%) of the actual jacket cost (being its
     40% working interest plus an additional 40% for a total of 80% of the
     actual jacket costs), which combined thereby increases the promote paid by
     Ridgewood to Chevron to a 2:1 level for the AFE cost, subject to Article 3,
     plus the jacket cost.

5. ASSIGNMENT, TIMING & INTEREST TRANSFERRED. Ridgewood shall earn, and Chevron
     shall timely make, an Assignment of Operating Rights ("Assignment") in the
     Contract Area to Ridgewood, if and only if:

     a)   the Initial Well or Substitute Well is sidetracked, drilled and logged
          to the Objective as described in Article 2 above, or
     b)   if the Initial Well, or its Substitute Well, either fails to reach the
          Objective, or reaches the Objective, but the Parties have expended at
          least one hundred and fifteen percent (115%) of the funds estimated to
          sidetrack, drill and log the Initial Well as stated in the AFE,


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 3



          whether such well is completed or not, then Ridgewood will be entitled
          to an Assignment of Chevron's operating rights, as set forth on
          Exhibit "A" as provided for herein, and
     c)   Ridgewood complies with all of the terms of this PA.

     Within sixty (60) days of satisfying a) and c) or b) and c) of the above
     referenced events, Chevron will assign, without warranty of title, express
     or implied, to Ridgewood forty percent of eight-eighths (40% of 8/8ths) of
     Chevron's operating rights within the Contract Area, from the surface of
     the earth to the stratigraphic equivalent of the sub sea true vertical
     depth of 15,083' as seen in the Samedan Oil Corporation OCS-G 13982 Well
     No. 1 drilled in Viosca Knoll Block 252 and forty percent of twenty-five
     percent of eight-eighths (40% of 25% of 8/8ths) of Chevron's operating
     rights within the Contract Area, below the stratigraphic equivalent of the
     sub sea true vertical depth of 15,083' as seen in the Samedan Oil
     Corporation OCS-G 13982 Well No. I drilled in Viosca Knoll Block 252 down
     to 99,999 feet. Such interest is further subject to and burdened by all of
     the contracts, agreements and dedications recited herein and lessor's
     royalty and the overriding royalty interests as set out on Exhibit "A".

     If the Initial Well or Substitute Well fails to reach the Objective, but
     encounters, as mutually agreed, a zone(s) or formation(s) capable of
     producing in paying quantities, above the Objective, that is within the
     Contract Area, and the Parties mutually agree to cease further drilling
     operations prior to reaching the Objective, Ridgewood will thereafter be
     entitled to an Assignment of operating rights within the Contract Area for
     the interests above stated but. limited to the total depth drilled and
     logged plus 100 feet.

6. WARRANTY. The transfer of any interest in the Contract Area pursuant to this
     PA to Ridgewood shall be made by Chevron without express or implied
     warranty of any kind. Chevron shall grant and convey to Ridgewood full
     subrogation and substitution to all Chevron rights in warranty against the
     predecessors in interest of Chevron and its affiliates. Chevron shall
     provide Ridgewood full access to the Chevron files and records related to
     the Contract Area for independent review and analysis by Ridgewood. Such
     files and records are not warranted as complete or accurate but were
     maintained as business records upon which Chevron relies.

7. NO NEW LEASE BURDENS. Until Ridgewood earns an interest under this PA, or
     until the right to earn a portion of the Chevron interest in the Contract
     Area pursuant to this PA terminates, Ridgewood and Chevron (except as
     specified in Article 15) agree that they have not and will not create any
     additional lease burdens or dedications on the Contract Area. No mortgage
     or pledge or refinancing arrangement by Ridgewood before or after any such
     interest is earned or assigned is ever permitted without the prior written
     consent of Chevron, which consent shall not be unreasonably withheld. Such
     condition shall be made express in any Assignment of earned area made to
     Ridgewood.


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 4


8. TRANSFER SUBJECT TO APPLICABLE APPROVALS. In the event that the transfer of
     any interest in and to the Contract Area requires approval of the lessor or
     of any federal agency having jurisdiction, the obligation to obtain such
     pertinent approval shall be Ridgewood's, at its cost and risk. Chevron
     agrees to assist Ridgewood as necessary to help Ridgewood secure such
     approvals, including but not limited to the preparation of mutually
     agreeable assignments or conveyance instruments appropriate for fling and
     recordation purposes with the MMS and/or applicable parish records.

9. ACCOUNTING MATTERS. As to the Contract Area, all costs and expenses, which
     are accrued or incurred pursuant to this PA and under any transfer of
     interest in the Contract Area executed pursuant hereto, if any, shall be
     determined and accounted for in accordance with the Accounting Procedure,
     which is in Exhibit "C" of the OA, attached hereto as Exhibit "B".

10. SUBSTITUTE WELL. If the Initial Well is drilled and prior to reaching the
     Objective, Chevron encounters mechanical difficulties, gulf coast
     conditions or other conditions which render further drilling impractical,
     or if the Parties agree, per Article 5 above, to complete the Initial Well
     above but without reaching the Objective, then without limiting the
     Parties' rights pursuant to Article 5, then either of the Parties shall
     have the right to propose the drilling of another well to the Objective,
     hereinafter referred to as a "Substitute Well", at and to any legal
     location in the Contract Area, but such operations must commence within 120
     days after the date the rig was released from the last operation on the
     Initial Well. If such well is proposed and Ridgewood participates and the
     Substitute Well is timely and properly commenced and drilled in compliance
     with all terms and conditions provided herein for the Initial Well, then
     such Substitute Well shall, in all respects (but, in any event, shall be
     subject to the Article 3 cumulative cost sharing limitation for the Initial
     Well and Substitute Well) be considered as if it was the Initial Well and
     any references in this PA to the Initial Well shall also include any
     Substitute Well.

11. SUBSEQUENT OPERATIONS. Should Ridgewood earn hereunder, where the Initial
     Well (or a Substitute Well therefore) is drilled to the Objective, as
     provided above and the Parties mutually agree to complete the Initial Well
     in the Objective, or should the Parties mutually agree, per Article 5
     above, to complete the Initial Well above but without reaching the
     Objective, no Party shall hold the right to propose a well or any other
     drilling operations pursuant to the OA until after six (6) months of
     continuous production from any earning well or six months from the last
     production in paying quantities, should any earning well fail to provide
     six (6) months of continuous production, and any such permitted wells and
     operations shall be conducted in accordance with the OA. Should the Initial
     Well be a dry hole and should the Parties mutually agree, a subsequent well
     may be proposed by either party at any time but subject to the delay period
     and rights provisions in the PA.



Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 5


     Without limiting the express provisions of the Proposal for Development
     Operation Letter Agreement dated October 10, 2006, between Chevron U.S.A.
     Inc. and Coldren Resources, LP, the Parties further agree to limit and
     prohibit any drilling and/or development operations in the South Half of
     the South Half (S/2 of the S/2) of the Contract Area within or to the James
     Lime sand, as such sand was seen in that certain OCS-G 10930, Well No. A2
     drilled and completed on Viosca Knoll Block 251, until the abandonment of
     such zone in such well or unless Coldren Resources, LP consents to such
     drilling and/or development operation. This restriction within the South
     Half of the South Half (S/2 of the S/2) of OCS G 13980 of the Contract Area
     is to provide protection from drainage and reserves and grants no rights to
     Coldren Resources, LP in any acreage earned by the Parties in the drilling
     of the Viosca Knoll Block 207 #2ST #2 well, other than to the retained
     overriding royalty interest, as set out in Exhibit "A", and any well
     information due Coldren Resources, LP as a result of their election not to
     participate and farmout their interest pursuant to and referenced in
     Article 15.C.3. Such condition shall be made express in any Assignment of
     earned area made to Ridgewood.

12. DESIGNATIONS. The Parties agree to execute the necessary designation of
     operator forms and any other forms required by the MMS or other regulatory
     authorities to carry out their operations and to make Chevron the operator
     under the PA, if required, and the OA, with any earning by Ridgewood.

13. OPERATING AGREEMENT. Before earning under the PA and any ratification or
     execution of the Exhibit "B" OA after earning under the PA, Ridgewood
     acknowledges the Chevron interest available to Ridgewood hereunder remains
     bound under this PA and the VK 252 Unit Operating Agreement. Should Chevron
     earn the rights and interest of Coldren Resources LP under the Proposal for
     Development Operation Letter Agreement dated October 10, 2006, between
     Chevron U.S.A. Inc. and Coldren Resources, LP and Ridgewood earn hereunder,
     Ridgewood shall formally execute or ratify the appropriate operating
     agreement, attached hereto as Exhibit "B", only as it pertains to the
     Contract Area and the Viosca Knoll 252 Unit Operating Agreement effective
     January 21, 1994 between Samedan Oil Corporation and Continental Land & Fur
     Co., Inc. for the proportionate rights not held or not made the subject of
     this PA, unless all rights holders, including Coldren Resources, LP, agree
     otherwise. Further, due to the varying ownership in the deep rights, the OA
     will be depth limited to only cover from the surface of the earth to the
     stratigraphic equivalent of the sub sea depth of 15,083' as seen in the
     Samedan Oil Corporation OCS-G 13982 Well No. 1 drilled in Viosca Knoll
     Block 252. Notwithstanding any other provision of this PA that might
     indicate to the contrary, if there is any conflict between any other
     provision of this PA and a provision of the OA, the other provisions of
     this PA shall prevail, as between the Parties.

14. TERM. This PA shall automatically terminate on May 8, 2007 and without
     liability or obligation, unless the Initial Well is timely commenced. Once
     and if a well has been drilled under which Ridgewood participates and earns
     and that entitles Ridgewood to an Assignment as provided above in Article
     5, those PA rights and obligations surviving the earning and the OA shall
     remain in effect as to such Contract Area, so long as the lease


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 6



     within the Contract Area remains in full force and effect or any
     obligations between the Parties remain unsatisfied.

15. REPRESENTATIONS. Chevron's business records reflect with respect to the
Contract Area and North Jaguar Prospect that:

          A.        The Contract Area is dedicated and committed to the
                    following Contracts and Agreements
               1)   Gas Gathering Agreement effective June 14, 2000, between
                    Williams Field Services-Gulf Coast Company, L.P. and Chevron
                    U.S.A. Inc.
               2)   Gas Gathering and Processing Agreement effective March 1,
                    2000, between Chevron U.S.A. Production Company, Samedan Oil
                    Company, Shell Offshore Inc., and Amoco Production Company
                    for the Viosca Knoll 252 Unit, as amended.
               3)   VK 251 "A" Interconnect & Platform Use Agreement dated May
                    30, 2000, between Samedan Oil Corporation, Chevron U.S.A.
                    Inc. and Williams.
               4)   Gas Gathering Agreement dated June 14, 2000.
               5)   Agreement for Capacity Release and Billing Agency dated
                    August 9, 2000.
               6)   Natural Gas Processing Agreement Gulf of Mexico dated March
                    1, 2002, by and between Chevron U.S.A. Inc., Texaco
                    Exploration and Production Inc., and Dynergy Midstream
                    Services, Limited Partnership, as amended, as to depths from
                    the surface through the James Lime formation.
               7)   Letter Agreement dated October 14, 2004, effective August 1,
                    2004, between Noble Energy, Inc. and Chevron, detailing
                    Production Handling Agreement terms for the Viosca Knoll 252
                    Unit area.

          B.        All required filings have been made with the applicable
                    regulatory authorities and Chevron is not aware of any
                    notices, pending or threatened violations of any applicable
                    regulation.

          C.        The Contract Area is subject to the following Contracts and
                    Agreements:
               1)   Viosca Knoll 252 Unit Operating Agreement effective January
                    21, 1994 between Samedan Oil Corporation and Continental
                    Land & Fur Co., Inc., as amended, until contracted, amended
                    and/or terminated.
               2)   Viosca Knoll 252 Unit Agreement, bearing Contract No.
                    754394013 effective February 11, 1994 between Chevron U.S.A.
                    Inc. and Samedan Oil Corporation, as amended, until
                    contracted.
               3)   Proposal for Development Operation Letter Agreement dated
                    October 10, 2006, between Chevron U.S.A. Inc. and Coldren
                    Resources, LP.
               4)   Confidentiality & AMI Agreement dated September 9, 2006
                    between Chevron U.S.A. Inc. and Ridgewood Energy
                    Corporation.
               5)   Offer to Participate Letter Agreement (LOI), dated October
                    17, 2006, as Parties agreed and accepted on October 19,
                    2006, between Ridgewood Energy Corporation and Chevron
                    U.S.A. Inc.


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 7


               6)   Assignment of Operating Rights Interest, dated effective
                    April 1, 1996 and bearing upon OCS-G 13980, between
                    Continental Land & Fur Co., Inc. as Assignor and Samedan Oil
                    Corporation and Chevron U.S.A. Inc. as Assignees.
               7)   Suspension of Production for Lease OCS-G 13980, by MMS
                    approval letter dated November 7, 2006.
               8)   Right of Use and Easement for Lease OCS-G 10926 Viosca Knoll
                    Block 206 (RUE #30012), by MMS approval letter dated
                    November 9, 2006.

          D.   Chevron represents, to the best of its knowledge, that with
               respect to that portion of the leases Chevron is contributing to
               the Contract Area that:
          1)   Chevron has paid rentals and has an approved SOP to maintain the
               lease in full force and effect.
          2)   Chevron is in material compliance with the terms and conditions
               of the lease.
          3)   The lease is not subject to any royalty, overriding royalty, net
               profits interest or other similar burden on production, except as
               referenced above, and the lessor's royalty.
          4)   There are no liens, mortgages, deeds of trust, judgments or other
               encumbrances of any kind or nature on the lease or Chevron's
               working interest in the lease.
          5)   There are no pending claims or litigation relative to the lease.
          6)   There are no preferential purchase rights, consents to assign or
               other restrictions on Chevron's ability to enter into this
               Agreement, other than those addressed in the Coldren Resources,
               LP letter agreement at 15.C 3.
          7)   There are no other owners of working interests in the lease
               included within the Contract Area with the exception of;
                    a.   Coldren Resources, LP.'s ownership rights as set out in
                         the above referenced Article 15.C.3: and,
                    b.   Operating Rights owners of record at the MMS as to all
                         depths below 15,083'.

16. INTEGRATED AGREEMENT. Except as provided in Article 18 below, this PA and
     the Exhibits attached hereto comprise the entire agreement between the
     Parties and supersedes all prior agreements and understandings relating to
     the subject matter hereof, including the LOI, dated October 17, 2006,
     between the Parties. Except as provided in Article 18 below, in the event
     of any conflicts between the provisions of this PA and any other agreement,
     including any operating agreement or any agreement referenced herein as an
     exhibit or to be executed by the Parties hereafter, the provisions of this
     PA shall control, as between the Parties.

17. TAX PARTNERSHIP. The Parties understand and agree that the arrangement and
     undertakings evidenced by this PA, taken together, result in a partnership
     for purposes of Federal income taxation and for purposes of certain state
     income tax laws which incorporate or follow Federal income tax principles
     as to tax partnerships. Such partnership for tax purposes is hereinafter
     referred to as the "Tax Partnership". For every


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 8


     other purpose of this PA, however, and notwithstanding any other provision
     of this PA, express or implied, to the contrary, the Parties understand and
     agree that their legal relationship to each other under applicable state
     law with respect to all property subject to this PA is one of tenants in
     common, or undivided interest owners, or lessee-sublessees, and not one of
     partnership; that the liabilities of the Parties shall be several and not
     joint or collective; and that each Party shall be solely responsible for
     its own obligations. The Tax Partnership shall be governed by Exhibit "F"
     of the attached Exhibit "B" OA. Except as provided in such Exhibit "F", the
     Parties agree not to elect to have the Tax Partnership excluded from the
     application of all or any part of Subchapter K of Chapter One of Subtitle A
     of the Internal Revenue Code of 1986, as amended (the "Code"), from any
     successor provisions thereto under the Code, or from any provisions of
     state income tax laws of substantially the same effect.

18. AREA OF MUTUAL INTEREST. Notwithstanding any other agreement to the
     contrary, and both prior to and after any Ridgewood earning of any interest
     in the Contract Area described herein in Article 1, the Confidentiality &
     AMI Agreement as referenced above in Article 15.C.4 shall survive and will
     control any AMI obligations between the Parties and the Parties further
     agree that the provisions of the referenced Confidentiality & AMI Agreement
     shall take precedence over the PA.

19. PRODUCTION HANDLING AGREEMENT. Within ten days following the commencement of
     the Initial Well, the Parties agree to enter into negotiations of a
     mutually acceptable Production Handling Agreement ("PHA"), if applicable,
     substantially in the form as set out in Exhibit "D".

     The Parties understand that should there be a need for any production
     handling arrangements that extend beyond any Contract Area facilities,
     which would be jointly owned by Chevron and Ridgewood, that the Parties
     will most likely utilize the jointly owned Chevron sixty percent (60%) and
     Coldren Resources, LP forty percent (40%) Viosca Knoll Block 251 "A"
     Facility, and while Chevron will attempt to gain Coldren's acceptance to
     Chevron's terms, Chevron cannot guarantee that Coldren's PHA terms will be
     the same as Chevron's PHA terms.

20. GOVERNING LAW. This PA shall be governed by and in accordance with the laws
     of the State of Alabama, without regard to any choice of law or rule
     thereof that would direct the application of the laws of any other
     jurisdiction.

21. INDIVIDUAL LIABILITY. The rights, duties, elections, obligations, and
     liabilities of the Parties shall be several and not joint or collective,
     and nothing contained herein is intended to create, nor shall it be
     construed as creating, a partnership of any kind (except the tax
     partnership specified in Article 17 above), joint venture, association, or
     other business entity recognizable by law for any purpose. The Parties
     shall be individually responsible only for their own obligations, except as
     herein described.


Ridgewood North Jaguar PA
November 1, 2006


                                                                          Page 9


22. NOTICES. All notices required hereunder shall be in writing sent by
     certified mail or overnight mail delivery, or by facsimile
     telecommunications to the addresses set forth below, and shall be deemed
     effective when actually received by the addressee, as follows:


                          Ridgewood Energy Corporation
                         11700 Old Katy Road, Suite 280
                                Houston TX 77079
                               Tel: (281)293-8449
                               Fax: (281)293-7705
                                Attn: Greg Tabor
                            Executive Vice President


                              Chevron U.S.A. Inc.
                               935 Gravier Street
                              New Orleans, LA 70112
                               Tel: (504) 592-6356
                               Fax: (504) 592-7110
                              Attn: Gordon R. Cain
                                  Land Manager


23. COUNTERPART EXECUTION. This PA may be executed by signing the original or a
     counterpart thereof with the same force and legal effect as if all
     executions were on one single instrument.

24. SUCCESSORS AND ASSIGNS. This PA shall be binding upon and inure to the
     benefit of the Parties and their respective heirs, representatives,
     successors and assigns. Ridgewood shall not assign their interests in this
     PA or any rights earned hereunder without the prior written consent of
     Chevron, which consent shall not be unreasonably withheld.

25. INSURANCE. Ridgewood shall independently acquire or self-insure for the
     coverage and amounts as shown on Exhibit "B" OA and provide evidence of
     such coverage to Chevron prior to commencement of operations hereunder.
     Such coverage and limits shall not in any way limit any Ridgewood indemnity
     due Chevron.

26. INDEMNITY.

     A.   Ridgewood agrees to protect, indemnify, and save Chevron, its parent,
          subsidiaries, affiliates, and/or successors and the directors,
          officers, employees or agents of each ("Chevron Company Group") free
          and harmless from all obligations, business dealings, liabilities,
          debts, charges, claims, damages, demands, costs (including attorneys'
          fees and court costs), penalties and causes of action arising directly
          or indirectly out of any dealing with third parties Ridgewood has with


Ridgewood North Jaguar PA
November 1, 2006

                                                                         Page 10


     regard to financing or the assignment of, in whole or in part, any rights
     under this PA and to relieve the Chevron Company Group from any and all
     liability (exclusive of business debts and charges) incurred as a result of
     such actions. The indemnities and covenants of this Article 26 shall be
     effective whether or not such obligations, business dealings, liabilities,
     debts, charges, claims, damages, demands, costs (including attorneys' fees
     and court costs), penalties and causes of action aforesaid are caused
     wholly or partly by negligence attributed to the Chevron Company Group, or
     by any other means, excepting those occurrences involving the gross
     negligence or willful misconduct of the Chevron Company Group.

B. Chevron agrees to protect, indemnify, and save Ridgewood, its parent,
     subsidiaries, affiliates, and/or successors and the directors, officers,
     employees or agents of each ("Ridgewood Company Group") free and harmless
     from all obligations, business dealings, liabilities, debts, charges,
     claims, damages, demands, costs (including attorneys' fees and court
     costs), penalties and causes of action arising directly or indirectly out
     of any dealing with third parties Chevron has with regard to financing or
     the assignment of, in whole or in part, any rights under this PA and to
     relieve the Ridgewood Company Group from any and all liability (exclusive
     of business debts and charges) incurred as a result of such actions. The
     indemnities and covenants of this Article 26 shall be effective whether or
     not such obligations, business dealings, liabilities, debts, charges,
     claims, damages, demands, costs (including attorneys' fees and court
     costs), penalties and causes of action aforesaid are caused wholly or
     partly by negligence attributed to the Ridgewood Company Group, or by any
     other means, excepting those occurrences involving the gross negligence or
     willful misconduct of the Ridgewood Company Group.

C. Chevron shall, as between the Parties, remain solely liable for all
     liabilities, costs and risks of any kind or nature arising out of its
     operations relating to the VK 252 Unit Agreement or the VK 252 Unit
     Operating Agreement that are not related to this PA and in which Ridgewood
     does not participate, including, but not limited to the plugging and
     abandonment and remediation of all existing wells, platforms and other
     facilities on said Unit and under said Unit Operating Agreement ("Chevron
     Retained Claims"). CHEVRON SHALL RELEASE, DEFEND, INDEMNIFY AND HOLD
     RIDGEWOOD COMPANY GROUP HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS,
     CAUSES OF ACTION, LIABILITIES, DAMAGES (INCLUDING COURT COSTS AND
     ATTORNEYS' FEES) AND JUDGEMENTS ARISING OUT OF THE CHEVRON RETAINED CLAIMS.

27. DISCLAIMER OF WARRANTY.

     THIS PA IS MADE WITHOUT ANY WARRANTY OF TITLE. CHEVRON FURTHER DOES NOT
     WARRANT EITHER EXPRESS, STATUTORY OR IMPLIED, AS TO TITLE, MERCHANTABILITY,



Ridgewood North Jaguar PA
November 1, 2006


                                                                         Page 11


     CONDITION, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE AS TO THE LEASE IN
     THE CONTRACT AREA, AND ALL OTHER PROPERTY COVERED BY THIS PA, INCLUDING,
     BUT NOT LIMITED TO THE WELL BORES, EQUIPMENT AND FACILITIES UTILIZED BY THE
     PARTIES HEREUNDER, OR ANY OTHER SORT OF WARRANTY AND IS WITHOUT RECOURSE
     AGAINST CHEVRON WHATSOEVER, EVEN AS TO THE RETURN OF CONSIDERATION. CHEVRON
     MAKES NO REPRESENTATIONS OR WARRANTIES REGARDING RIDGEWOOD'S RIGHT OF
     INGRESS TO AND EGRESS FROM THE CHEVRON LEASE ACROSS ADJACENT OR ADJOINING
     LANDS.


     CHEVRON SPECIFICALLY DISCLAIMS, AND RIDGEWOOD EXPRESSLY WAIVES ANY IMPLIED
     WARRANTY OF TITLE WITH RESPECT TO THE LEASE IN THE CONTRACT AREA EXCEPT FOR
     THE ACTS BY, THROUGH AND UNDER CHEVRON, BUT NOT OTHERWISE. RIDGEWOOD
     ACKNOWLEDGES THAT THIS EXPRESS WAIVER SHALL BE CONSIDERED A MATERIAL AND
     INTEGRAL PART OF THIS PA AND PART OF THE CONSIDERATION GIVEN THEREFOR.
     RIDGEWOOD FURTHER ACKNOWLEDGES THAT THIS WAIVER HAS BEEN SPECIFICALLY
     BROUGHT TO RIDGEWOOD'S ATTENTION AND THAT RIDGEWOOD HAVE VOLUNTARILY AND
     KNOWINGLY CONSENTED TO THIS WAIVER. THE PARTIES AGREE THAT FOR THE PURPOSES
     OF THIS WAIVER OF THE IMPLIED WARRANTY OF TITLE, CHEVRON AND THEIR
     AFFILIATES SHALL BE CONSIDERED AS THE SELLER.


     RIDGEWOOD ACKNOWLEDGES THAT (i) IT IS A SOPHISTICATED INVESTOR
     AND OPERATOR IN THE OIL AND GAS BUSINESS; (ii) IT UNDERSTANDS THE RISKS
     INVOLVED IN OIL AND GAS EXPLORATION AND DEVELOPMENT; AND (iii) IT
     UNDERSTANDS THAT UNDER ITS PARTICIPATION RIDGEWOOD ASSUMES ALL OF THE RISKS
     ATTENDANT TO THE EXPLORATION AND PRODUCTION OPERATIONS CONTEMPLATED UNDER


Ridgewood North Jaguar PA
November 1, 2006


                                                                         Page 12


     THIS PA AND THAT THE RIDGEWOOD INVESTMENT MADE HEREUNDER IN THOSE
     OPERATIONS CONDUCTED UNDER THIS PA IS FULLY AT RISK.


Please indicate your agreement to the terms and conditions as set forth in this
PA by executing two originals of this PA in the space provided and returning one
executed original on or before November 22, 2006.

AGREED TO AND ACCEPTED this 15th day of November, 2006

Chevron U.S.A. Inc.


By:    /s/ G. R. Cain
       --------------
       G.R. Cain
       Assistant Secretary


AGREED TO AND ACCEPTED this 20th day of November, 2006.

Ridgewood Energy Corporation

By:    /s/ Greg Tabor
       ---------------
       Greg Tabor

Title: Executive Vice President
       ------------------------



Ridgewood North Jaguar PA
November 1, 2006


                                                                         Page 13


                                   EXHIBIT "A"
                                   -----------


                              North Jaguar Prospect
                              ---------------------

Attached to and made apart of that certain Participation Agreement dated the 1st
   day of November 2006, by and between Chevron U.S.A. Inc. and Ridgewood Energy
   Corporation


OCS Block: Viosca Knoll Block 207 being 5,760 acres.
- ---------


Lease: OCS-G 13980
- -----


Chevron Leasehold Interest:
- ---------------------------

One Hundred Percent of eight eights (100% of 8/8ths) from the surface of the
earth to the stratigraphic equivalent of the sub sea depth of 15,083' as seen in
the Samedan Oil Corporation OCS-G 13982 Well No. 1 drilled in Viosca Knoll Block
252, further subject to rights and obligations as set out in the Proposal for
Development Operation Letter Agreement dated October 10, 2006, between Chevron
U.S.A. Inc. and Coldren Resources, LP.

Twenty-five percent of eight eights (25% of 8/8ths) below the stratigraphic
equivalent of the sub sea depth of 15,083' as seen in the Samedan Oil
Corporation OCS-G 13982 Well No. 1 drilled in Viosca Knoll Block 252.


Lease Burdens:
- --------------

1/6 of 8/8ths Lessor's royalty in all depths.

2% of 8/8ths overriding royalty in favor of Noble Energy, Inc., from the surface
of the earth to the stratigraphic equivalent of the sub sea depth of 15,083' as
seen in the Samedan Oil Corporation OCS-G 13982 Well No. 1 drilled in Viosca
Knoll Block 252.

2% of 8/8ths overriding royalty in favor of Coldren Resources, LP from the
surface of the earth to the stratigraphic equivalent of the sub sea depth of
15,083' as seen in the Samedan Oil Corporation OCS-G 13982 Well No. 1 drilled in
Viosca Knoll Block 252.


Chevron Interest Before Casing Point (BCP"):            Thirty percent (30%)
- -------------------------------------------
Ridgewood Interest BCP:                                 Seventy Percent (70%)
- -----------------------

   o      Ridgewood will have and bear the obligation of paying its
          disproportionate share of the Initial Well AFE Cost of sidetracking,
          drilling and logging up to Casing Point or until one hundred fifteen
          percent (115 %) of the associated AFE to drill the Initial Well,
          whichever occurs first, have been spent in the drilling of said
          Initial Well and/or any Substitute Well(s).

Chevron Interest After Casing Point ("ACP"):            Sixty percent (60 %)
- -------------------------------------------
Ridgewood Interest ACP:                                 Forty Percent (40 %)
- -----------------------

Ridgewood North Jaguar PA
Exhibit A




BCP and ACP Interest:
- ---------------------

Both Chevron's and Ridgewood's BCP and ACP interest in the Initial Well are
derived from Chevron's above referenced leasehold interest and only as it
pertains to the depths from the surface of the earth down to the stratigraphic
equivalent of the sub sea depth of 15,083' as seen in the Samedan Oil
Corporation OCS-G 13982 Well No. 1 drilled in Viosca Knoll Block 252. Chevron's
and Ridgewood's ACP Interest in the depths below the stratigraphic equivalent of
the sub sea depth of 15,083' as seen in the Samedan Oil Corporation OCS-G 13982
Well No. 1 drilled in Viosca Knoll Block 252 will be proportionately reduced to
reflect Chevron's twenty-five percent of eight eights (25% 8/8ths) ownership.



Operator: Chevron U.S.A. Inc.
- --------







                                   Page 2 of 2

EX-10.2

                                                                    EXHIBIT 10.2

                             PARTICIPATION AGREEMENT
                          GARDEN BANKS BLOCKS 346 & 390


     This Participation Agreement (the "Agreement") is made and entered into
effective as of the 1st day of January, 2006, by and between Walter Oil & Gas
Corporation ("Walter") and Ridgewood Energy Corporation, as manager of Ridgewood
Energy S Fund LLC, ("Ridgewood") with all parties collectively referred to as
"Parties", and individually referred to as "Party".

                                    RECITALS

     WHEREAS, Walter has entered into that certain farmout agreement dated
effective November 7th 2005, ("Farmout Agreement") with Shell Offshore, Inc.
("Shell"), as Farmor, affecting all of Farmor's leasehold interest in Federal
Leases OCS-G 23303 and OCS-G 23312 covering Garden Banks blocks 346 and 390,
respectively, from the surface down to 22,350' TVD ("Leases"),


     WHEREAS, Walter desires to assign an undivided thirty percent interest in
the Farmout Agreement to Ridgewood to jointly drill an "Initial Test Well" (as
described in the Farmout Agreement),


     WHEREAS, Ridgewood desires to acquire an undivided thirty percent interest
in the Farmout Agreement and participate in drilling the Initial Test Well, all
in accordance with the terms of this Agreement.


     NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Parties agree as follows:

                                    SECTION I
                                    ---------
                                   Definitions

     1.01 In addition to those terms defined elsewhere in this Agreement, terms
defined in the Farmout Agreement shall have the same meaning when used herein.

                                   SECTION II
                                   ----------
                       Assignment and Assumption of Rights

     2.01 Upon obtaining Farmor's consent to assign if required under the
Farmout Agreement, Walter shall be deemed to have assigned to Ridgewood an
undivided thirty percent (30%) share of all of Walter's rights, benefits,
duties, liabilities and obligations related to, arising out of, or in any way
connected with the Farmout Agreement. Except as provided in Section 6.01, Walter
represents that it has not transferred or encumbered the rights, interests or
obligations transferred to Ridgewood hereunder.

     2.02 Ridgewood does hereby accept the assignment described in the
immediately preceding paragraph and agrees to assume and be liable for an
undivided thirty percent (30%) share of all of Walter's rights, benefits,
duties, liabilities, and obligations related to, arising under, or in any way
connected with the Farmout Agreement, as fully and effectively as though
Ridgewood was a signatory party thereto.

                                   SECTION III
                                   -----------
                               Operating Agreement

     3.01 The parties agree that the controlling operating agreement shall be
that certain operating agreement attached to the Farmout Agreement as Exhibit
"D" ("JOA") covering the Leases and naming Walter as operator of the Leases.
Contemporaneous with the execution of this Agreement, Ridgewood agrees to adopt
- --------------------------------------------------------------------------------
                                       1


and ratify the JOA and shall become a signatory party thereto. All operations on
the Initial Test Well and any and all subsequent operations on the Leases shall
be conducted in accordance with the terms and provisions of the JOA. With
respect to Ridgewood and Walter, if there are any conflicts between this
Agreement and the JOA, the terms and provisions of this Agreement shall prevail
and govern.

                                   SECTION IV
                                   ----------
                                Initial Test Well

     4.01 Subject to receipt of all necessary regulatory permits and approvals,
the Parties agree to commence drilling operations for the Initial Test Well on
the Leases on or before March 31St, 2006. The Initial Test Well shall be located
and drilled to a proposed total depth as identified in the AFE attached hereto
as Exhibit "A," which AFE shall be deemed ratified and approved by the parties
hereto concurrent with their execution of this Agreement. As consideration for
the opportunity to earn a Thirty Percent (30%) working interest in the Farmout
Agreement and Leases, Ridgewood shall bear Sixty Percent (60%) of the costs to
drill the Initial Test Well to casing point and through plugging and
abandonment, if the Initial Test Well is not saved for production. This
disproportionate cost sharing obligation shall be referred to as the "Promote."
The Promote will be applicable to the dry hole costs of the Initial Test Well
and will be limited to, 115% of the Initial Test Well's estimated dry hole cost
as noted in the attached AFE, or reaching actual casing point, whichever is
less. Notwithstanding anything to the contrary herein, the Promote will apply to
the plugging and abandonment of the Initial Test Well or its substitute subject
to the cap of 115% as noted herein. The Promote will also apply to any
substitute well or sidetrack of the Initial Test Well until Walter has received
115% of the original AFE dry hole costs. After the Promote has, been satisfied,
Ridgewood shall bear thirty percent (30%) of the costs and expenses associated
with the Initial Test Well, or any substitute well.


     4.02 Walter represents that it has contracted the Ocean Lexington drilling
rig at a day rate of $60,000.00 to drill the Initial Test Well and acknowledges
that Ridgewood's willingness to pay the Promote is based, in part, upon this
representation.

     4.03 Subject to reduction in accordance with Shell's reversionary rights,
it is understood and agreed that Energy Resources Technology, Inc. will
participate in the Initial Test Well to earn a 20% working interest in the
Farmout Agreement, Leases and Initial Test Well.

     4.04 For clarification purposes only, there shall be no penalty(ies)
assessable to either party hereto for failure of the Initial Test Well to be
spudded on or before March 31St, 2006.


                                    SECTION V
                                    ---------
                         Assignment of Operating Rights

     5.01 Upon the earning of interests under the Farmout Agreement, Walter
shall request the Farmor assign the earned interest directly into Walter and
Ridgewood in their respective working interest shares. However, if the Farmor
assigns 100% of the earned interest directly into Walter where Ridgewood is
entitled to its working interest share, then the parties shall within 10
business days of Farmor having assigned to Walter, execute an assignment
evidencing Ridgewood's proportionate ownership share of the earned interest.

                                   SECTION VI
                                   ----------
                                     Burdens

     6.01 Walter and Ridgewood shall each bear their respective working interest
share of (i) the lease royalty, (ii) the overriding royalty interest or the 25%
back-in and $2,000,000.00 credit, whichever is applicable, retained by Farmor
pursuant to the terms of the Farmout Agreement and (iii) an overriding royalty
interest to be retained by Walter ("Staff ORR") equal to 1 % of 8/8ths.
- --------------------------------------------------------------------------------
                                       2


                                   SECTION VII
                                   -----------
                                     Notices

     7.01 All notices, requests or demands to be given under this Agreement
shall be in writing and governed and directed to the representatives as
specified below:

      Ridgewood Energy Corporation       Walter Oil & Gas Corporation
      11700 Old Katy Rd., Suite 280      1100 Louisiana Street, Suite 200
      Houston, Texas 77079               Houston, TX 77002
      Attn: Mr. W. Greg Tabor            Attn: Mr. Ron Wilson
      Phone: 281-293-8449                Phone: 713-659-1221
      Fax: 281-293-7705                  Fax: 713-756-1177


                                  SECTION VIII
                                  ------------
                           Internal Revenue Provision

     8.01 It is not the purpose or intention of this Agreement to create any
partnership, mining partnership or association, and neither this Agreement nor
the operations hereunder shall be construed as creating any such legal
relationship; however, solely for income tax purposes only, the parties agree
that this Agreement shall be governed in accordance with Article 20 ("Taxes") of
the JOA.

                                   SECTION IX
                                   ----------
                                      Term

     9.01 This Agreement shall remain in effect for a term corresponding to the
term of the JOA.

                                    SECTION X
                                    ---------
                                  Miscellaneous

     10.01 This Agreement, together with all of its exhibits, is intended by the
Parties to be a complete and final statement of the agreement of the Parties
with respect to the subject matter hereof, and supersedes any prior oral or
written statements or agreements.

     10.02 Subject to all matters hereof, this Agreement shall be binding upon
the Parties hereto and their respective successors and assigns.

     10.03 This Agreement maybe executed in any number of counterparts, each of
which shall be valid and binding with respect to the signatories thereto, but
only upon the execution by all signatories of this Agreement or a counterpart
hereof.

     10.04 This Agreement shall be governed by the laws of the State of Texas
except where the Maritime Laws of the United States of America are applicable.
In the event that any dispute results in formal legal action, venue shall be
appropriate in the federal or state courts of Harris County, Texas.
- --------------------------------------------------------------------------------
                                       3


     10.05 In the event of a breach of this Agreement by any party hereto, the
non-breaching party shall be entitled to all remedies available at law or
equity, including but not limited to, specific performance, monetary damages and
injunctive relief.

     10.06 Walter shall provide Ridgewood with full and complete access to
Walter's files, records and data, so that Ridgewood may perform its due
diligence review of Walter's acquisition, ownership and obligations associated
with the Leases. Additionally, Walter shall provide Ridgewood with access to its
technical data associated with the Leases, including seismic, maps, well data
and geological data, subject however, to all confidentiality and data licensing
restrictions.




     IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed effective as of the date first set forth above.

WITNESSES:                             WALTER OIL & GAS CORPORATION

/s/ Melissa Coronado                   By: /s/ Ron Wilson
- -------------------------                  --------------------------
 Melissa Coronado                          Ron Wilson
                                           Vice President


WITNESSES:                             RIDGEWOOD ENERGY CORPORATION,
                                       as Manager of Ridgewood Energy S Fund LLC
/s/ Donna Ermis
- -------------------------              By: /s/ W. Greg Tabor
                                           --------------------------
/s/ Randy Bennett                          W. Greg Tabor
- -------------------------                  Executive Vice President


- --------------------------------------------------------------------------------
                                       4


[LOGO OMITTED]
WALTER OIL & GAS CORPORATION

                            1100 LOUISIANA, SUITE 200
                             HOUSTON, TX 77002-5299

                            AUTHORITY FOR EXPENDITURE


AFE NO             PROPERTY NO             TOTAL AFE AMOUNT          TYPE OF AFB
E0560              T022301001                $21,485,600             Drilling


EXPLORATORY ________      DEVELOPMENT ________      OTHER (Describe)_________


PROSPECT/FIELD NAME  Garden Banks 346 (390)  LEASE/WELL NO. OCS-G23303 Well No.1
                   ------------------------                 --------------------

PROPOSED T.V.D      22,000'                            M.D. 23,620'
                   ------------------------                 --------------------

COUNTY/PAR1SH      Offshore                           STATE Texas
                   ------------------------                 --------------------

LOCATION
                   -------------------------------------------------------------

DESCRIPTION OF WORK TO BE PERFORMED Cost to drill a 32 degree directional hole.
                                    --------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

 WORKING INTEREST OWNER        PERCENT WORKING INTEREST          W.I.OWNER SHARE
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
TOTAL                                          0.00000%                    $0.00
- --------------------------------------------------------------------------------


Prepared by:      /s/ Randy Reese        Randy Reese     Date    26 January 2006
                  ----------------------------------             ---------------

Review by:        /s/ C. J. Locke        C. J. Locke     Date    26 January 2006
                  ----------------------------------             ---------------

Approved by:              J. C. Walter III President     Date
                  ----------------------------------             ---------------

                             JOINT INTEREST APPROVAL
This expenditure is approved including the well control insurance coverage
provided by Walter Oil & Gas Corporation

Company                                proved by                    Date
        ------------------------                -------------------      -------

This expenditure is approved excluding the well control insurance coverage
offered by Walter Oil & Gas Corporation. Proof of insurance coverage for our
company is attached.

Company RIDGEWOOD ENERGY CORPORATION  Approved by  /s/ W G Tabor   Date 2/16/06
        ------------------------                   ---------------      -------




                         WALTER OIL AND GAS CORPORATION

                                    Drilling
                                AFE Cost Estimate

Field
Name: Garden Banks 346 (390)   OCS-G23303 Well  No. I    Prop. No. 7022301001
                                                           AFE No.       E0560
Project Description:                                       TVD           22,000'
Cost to drill a 32 degree directional hole.                MD            23,620'
                                                Exploratory: ______ Other:
                                                Development: ______



     INTANGIBLE DRILLING COSTS - (BCP)                                        $ ESTIMATED      $ ACTUAL

                                                                                   
101  Surveys                                                     & Permits        10,000
102  Legal Fees                                                                        0
103  Location & Road Construction                                                      0
105  Surface Damages & Restoration                                                     0
110  Drilling Rig - Mobilization                                                 650,000
111  Drilling Rig - Demobilization                                               650,000
112  Rig Cost - Footage                    FT @                       $/FT             0
113  Rig Cost - Daywork                  92 Days @          $60,000   $/Day    5,520,000
114  Bits                                                                        170,000
115  Fuel, Power & Water                 92 Days @          $12,000   $/Day    1,104,000
117  Fishing Tools & Services                                                          0
118  Directional Tools & Services                                                800,000
120  Dock Services                       92 Days @             $800   $/Day       73,600
121  Rental - Downhole                                                            60,000
124  Rental - Surface Equipment                                                   60,000
129  Inspection & Testing - Specify                                                    0
131  Mud & Chemicals                                                           2,500,000
138  Waste Water Disposal/Vacuum Trucks                                           60,000
139  Contract Labor                                                               30,000
140  Transportation - Land                                                        70,000
141  Transportation -Aircraft                                                     45,000
142  Transportation - Boats               92 Days@           $25,000   /day    2,300,000
146  Cement & Services                                                           250,000
148  Casing Crews & Equipment                                                     65,000
151  Cores & Core Analysis                                                             0
152  Logging                                                                     320,000
153  Mudlogging                                                                        0
154  Testing - DSTs & RFTs                                                             0
155  Mud Consultant                                                              150,000
158  Divers & Equipment                                                           90,000
160  Geological Supervision                                                            0
161  Drilling Supervision                                                        180,000
162  Camp Expenses &I Supplies                                                    35,000
163  Communications - Telephone & Radio                                           35,000
164  Insurance & Bonds                                                            90,000
168  Drilling Overhead (COPAS)                                                    90,000
169  Miscellaneous Expenses                                                      135,000
170  P&A - Cement & Services                                                      75,000
171  P&A - Other Costs                                                           500,000
175  Dryhole Contributions                                                             0
179  Contingency                                                              $2,431,000
194  Company Labor & Expenses                                                     90,000
     TOTAL INTANGIBLE DRILLING COSTS                                         $18,638,600

     TANGIBLE DRILLING COSTS - (BCP)                                          $ ESTIMATED      $ ACTUAL

235   Drive Pipe                        250  of              36 "@  $275/ft       68,750
240   Conductor Casing                1,400  of              22 "@  $120/ft      168,000
241   Surface Casing                  3,400  of          18 5/8 "@  $100/ft      340,000
242   Intermediate Csng               8,000  of          13 5/8 "@   $85/ft      680,000
243   Liner                           14000  of           9 5/8 "@    60/ft      840,000
246   Bradenhead & Casing Spools                                                       -
248   Mudline Suspension System    + Subsea Wellheads                            650,000
249   Other Equipment                                                            100,000
      TOTAL TANGIBLE DRILLING COST - (BCP)                                    $2,847,000

      TOTAL DRILLING TO CASING POINT                                         $21,485,600
- -----------------------------------------------------------------------------------------

      Prepared by: /s/ Randy Reese          Randy Reese               Date      26-Jan-06
      -----------------------------------------------------------------------------------
      Reviewed by: /s/ C. J. Looke          C. J. Looke               Date      26-Jan-06





[LOGO OMITTED]
Ridgewood Energy

February 16, 2006



Walter Oil & Gas Corporation
Attn: Mr. Chad Elias
1100 Louisiana, Suite 200
Houston, TX 77002


SUBJECT: Participation Agreement
         Garden Banks Blocks 346 & 390

Dear Mr. Elias:

Attached please find one (1) original Participation Agreement effective January
1, 2006, by and between Walter Oil and Gas Corporation and Ridgewood Energy
Corporation covering subject blocks. This document has been executed by W. Greg
Tabor on behalf of Ridgewood Energy.

Should you have any questions or need addition information, please contact me
at 281.293.9464.


Sincerely,

/s/ Donna Ermis
Donna Ermis
Office Manager
Ridgewood Energy








                11700 Old Katy Road, Suite 280, Houston, TX 77079
                        (T) 281.293.9464 (F) 281.293.7391
                             www.ridgewoodenergy.com

EX-10.3

                                                                    Exhibit 10.3

                            PARTICIPATION AGREEMENT

                         Portion of Main Pass Block 275


     This Participation Agreement ("Agreement") is made and entered into
effective as of the 13th day of December, 2006 (the "Effective Date"), by and
between Newfield Exploration Company ("Newfield") and Ridgewood Energy
Corporation ("Ridgewood"). Newfield and Ridgewood are also sometimes hereinafter
referred to collectively as the "Parties" or individually as a "Party".


                                   WITNESSETH:

     WHEREAS, Apache Corporation ("Apache"), (referred to as the "MP 275 Owner")
owns one hundred percent (100%) operating rights interest in the following
described portion of oil and gas lease and area, hereinafter referred to as the
"Contract Area":

     Oil and Gas Lease dated September 1, 1995, bearing serial number OCS-G
     15395, by and between the United States of America, acting through the
     Director, Bureau of Land Management, as Lessor, and Vastar Resources, Inc.,
     as Lessee, covering all of Block 275, Main Pass Area, South and East
     Addition, INSOFAR AND ONLY INSOFAR AS said lease covers the SW/4 and
     further limited to those depths from the surface down to 11,400' TVD or the
     stratigraphic equivalent depth of the top of the 11,100' sand as seen at
     11,051' TVD in OCS-G 15395 A-2 well, whichever is shallower, and further
     limited to the area situated Southward of the Northwest-Southeast Fault,
     immediately south and separate from the A-1 ST well and Northwest of the
     A-2 well.

     WHEREAS, Newfield and the Apache entered into that certain Option
Agreement, dated September 21, 2005 ("Option Agreement"), which provided the
Apache the option to either (i) participate with Newfield in drilling a test
well on the Contract Area or (ii) farmout the Contract Area to Newfield.

     WHEREAS, pursuant to the Option Agreement, Apache elected to farmout the
Contract Area to Newfield, and Newfield has entered into a formal farmout
agreement with Apache dated effective July 7, 2006 ("Farmout Agreement")
covering the Contract Area, which will provide that Apache shall reserve an
overriding royalty interest ("ORRI") of 8.3333% of 6/6ths, but proportionately
in the event that Apache owns less than one hundred percent (100%) of the record
title and/or operating rights in the Contract Area which Newfield may earn. A
copy of the Farmout Agreement is attached hereto as Exhibit "A";

     WHEREAS, Ridgewood agrees to bear its proportionate share of drilling costs
associated with the Initial Test Well (defined in Paragraph 3.1 hereinbelow) in
order to earn an interest in the Contract Area, pursuant to the terms and
conditions of this Agreement and the Farmout Agreement.

     WHEREAS, the Parties desire to enter into this Agreement to set forth the
manner in which the cost of drilling, producing and operating wells, and the
production from the Contract Area and interest in the Contract Area shall be
shared and/or owned.





     NOW, THEREFORE, for the consideration, being the mutual benefits and
advantages accruing hereunder, the sufficiency of which is hereby acknowledged,
the Parties agree as follows:


                       Article 1 - Interest of the Parties
                       -----------------------------------

     The costs, risk and liabilities associated with the exploration and
development of the Contract Area (including all wells, platforms, pipelines,
facilities and equipment associated directly with the specified operations
herein) and all oil and gas produced from wells drilled pursuant to the terms
hereof, shall be borne and owned, subject to the terms and conditions set out
herein and in the Option Agreement and the Farmout Agreement, and unless
otherwise agreed, by the Parties in accordance with the following percentage
working interests ("Working Interests"):

           Party                   Working Interests
           -----                   -----------------

          Newfield                      50.000%
          Ridgewood                     50.000%

* Subject to an obligation to pay a disproportionate share of Initial Test Well
costs, as further described in Article 3.


                         Article 2 - Operating Agreement
                         -------------------------------

     2.1   Newfield is designated as the Operator of the Contract Area, and all
operations conducted on the Contract Area shall be performed in accordance with
and shall be subject to the terms and provisions of this Agreement, the Farmout
Agreement and the Operating Agreement attached hereto as Exhibit "B" ("Operating
Agreement"). The Parties shall execute the Operating Agreement simultaneously
with this Agreement.

     2.2   Notwithstanding anything herein to the contrary, the non-consent
penalties set forth in Article XII of the Operating Agreement shall not be
applicable to drilling operations on the Initial Test Well, or substitute
therefor, prior to the Parties drilling an Earning Well (as hereinafter
defined).


                          Article 3 - Initial Test Well
                          -----------------------------

     3.1   On or before January 1, 2007, Newfield shall commence actual drilling
operations for the Main Pass 275 (OCS-G-15395) No. 3 Well at an approximate
surface location of 2,474 FSL and 5,656 FWL of Main Pass 275 and bottom-hole
location of 2,977' FSL and 5,320' FWL of Main Pass 275, ("Initial Test Well").
The Initial Test Well shall be drilled to an approximate depth of 11,200' TVD,
or a depth sufficient to test the 10,800' sand, whichever depth is shallower
("Contract Depth").





     3.2   As additional consideration for the opportunity to earn its Working
Interest in the Contract Area, the Parties will pay the following percentages of
the costs to drill the Initial Test Well to Casing Point (as described in
Article 3.3 below):

                 Newfield                  33.3333%
                 Ridgewood                 66.6667%

     The dry hole cost for the Initial Test Well is estimated to be
$9,454,931.00 ("Dry Hole Cost") as outlined in the drilling authorization for
expenditure ("AFE") for the Initial Test Well attached hereto as Exhibit "C". By
its execution of this Agreement, Ridgewood has approved the AFE. Ridgewood's
disproportionate cost sharing will cease once cumulative costs and expenses for
the Initial Test Well, and if drilled, the substitute well therefore, exceeds
115% of the actual Dry Hole Cost being $10,873,170, or the well reaches Casing
Point, whichever is less. Thereafter Newfield will bear its 50% and Ridgewood
will bear its 50% share of subsequent costs, subject to the non-consent rights
set out in the Operating Agreement.

     3.3   Casing Point is defined as that point in time when the Initial Test
Well, or substitute well therefor, has been drilled to the Contract Depth,
appropriate tests have been performed and a recommendation is made to (i) set
casing and complete the well, (ii) plug and abandon the well or (iii) conduct
other operations as provided within the priority of operations outlined within
the Operating Agreement.

     3.4   If the Initial Test Well is either, i) unable to reach the Contract
Depth due to encountering domal material, heaving shale, saltwater, salt or
other impenetrable substance, or suffers any adverse condition (mechanical,
structural, stratigraphic or otherwise) in drilling said well, which substance
or condition cannot be overcome at a reasonable cost by means considered
customary or ordinary in the industry; or, ii) plugged and abandoned as a dry
hole, then any Party shall have the right to propose a substitute well in the
same manner as provided for hereinabove. Each Party shall have the option, but
not the obligation, to participate in such substitute well; however, if a Party
elects not to participate in a substitute well, it shall forfeit its rights
under this Agreement, and in the Farmout Agreement. If actual drilling
operations are commenced on the substitute well within ninety (90) days from the
date of rig release of the Initial Test Well, then said well shall be considered
the Initial Test Well for purposes of this Agreement.


                 Article 4 - Assignment and Assumption of Rights
                 -----------------------------------------------

     4.1   Newfield shall obtain Apache's written consent to assignment, by
Newfield to Ridgewood, of a 50.000% interest in the rights, duties and
obligations conferred by the Farmout Agreement.

     4.2   Upon Ridgewood's participation pursuant to the terms and conditions
set forth herein and in the Farmout Agreement, and upon the Party drilling an
Earning Well (as defined in the Farmout Agreement) and satisfying the Earning
Requirements defined and set out in the Farmout Agreement, the Party who
participated in the Earning Well, and the full satisfaction of the Earning
Requirements, shall receive from Apache, an assignment of Apache's Working
Interest share of the operating rights interest in the Contract Area, from the
surface down to the base of the deepest productive interval in said well and its
stratigraphic equivalent, plus one hundred (100) feet.





     4.3   The interests assigned to the Party pursuant hereto shall be subject
only to the federal 1/6th royalty (subject to any applicable royalty relief
granted by the Minerals Management Service), the Apache ORRI, shall be free and
clear of any other overriding royalty interest, production payments, or other
burdens on production. The Farmout Agreement provides that Apache's assignment
of interest in the Contract Area shall contain a special warranty of title
whereby Apache shall warrant title to the assigned interest by, through, or
under Apache, but not otherwise.


                       Article 5 - Ownership of Production
                       -----------------------------------

     Production from each well drilled on the Contract Area will be owned
pursuant to the terms of this Agreement, the Farmout Agreement and the Operating
Agreement.


                              Article 6 - Insurance
                              ---------------------

     In connection with any drilling and/or production operations on the
Contract Area, the Operator shall carry the type and amount of insurance
required by the Farmout Agreement and the Operating Agreement. No other
insurance shall be required of the Operator hereunder.


                           Article 7 - Confidentiality
                           ---------------------------

     Except for required disclosures as provided in the Operating Agreement, or
the Farmout Agreement, no Party shall release any geological, geophysical, or
reservoir information or any logs or other information pertaining to the
progress, tests, or results of any well drilled pursuant to this Agreement.


                              Article 8 - Conflicts
                              ---------------------

     Unless provided for otherwise in this Agreement, in the event of any
conflict between the terms and conditions as set forth herein and the terms and
conditions set forth in the Farmout Agreement, the terms and conditions set
forth in the Farmout Agreement shall control. In the event of any conflict
between the terms and conditions as set forth herein and the terms and
conditions set forth in the Operating Agreement, the terms and condition set
forth herein shall control.


                               Article 9 - Notices
                               -------------------

     All notices, requests or demands to be given under this Agreement shall be
in writing and shall be deemed to have been given (i) three (3) business days
after being sent by registered mail or certified mail, postage prepaid, or (ii)
on the day sent, if hand delivered or sent by facsimile, with receipt confirmed
and verbal confirmation, in each case addressed as follows or to such other
address as may have been furnished in writing to the other Parties hereto in
accordance herewith:





     If to Newfield:
     --------------
     Newfield Exploration Company
     363 N. Sam Houston Pkwy. E., Suite 2020
     Houston, Texas 77060
     Attention: Ms. Christina Linscomb
     Office Phone: (281) 847-6074
     Fax Number: (281) 405-4207

     If to Ridgewood:
     -----------------
     Ridgewood Energy Corporation
     11700 Old Katy Road, Suite 280
     Houston, Texas 77079
     Attn: Mr. Greg Tabor
     Office Phone: (281) 293-8449
     Fax Number: .(281) 293-7705


                          Article 10 - Topical Headings
                          -----------------------------

     Topical headings appearing at the top of each numbered article have been
inserted for convenience only and are to be given no force or affect whatsoever
in the interpretation of this Agreement.


                       Article 11 - Successors and Assigns
                       -----------------------------------

     This Agreement shall be binding upon each Party and their successors and
assigns. An assignment by a Party of any lands affected by this Agreement shall
be made expressly subject to, and the assignee shall expressly agree to assume
and comply with, the terms and provisions of this Agreement, the Farmout
Agreement and the Operating Agreement.


                       Article 12 - Counterpart Execution
                       ----------------------------------

     This Agreement may be executed by signing the original or a counterpart
thereof. If this Agreement is executed in counterparts, all counterparts taken
together shall have the same effect as if all the Parties had signed the same
instrument. However, this Agreement shall not be effective as to any Party,
until it has been executed by all Parties.





     IN WITNESS WHEREOF, this instrument is executed by each of the Parties on
the dates noted below, but shall be effective as of the Effective Date
hereinabove first written.



WITNESSES:                          NEWFIELD EXPLORATION COMPANY


/s/ Rachelle Taylor                      By: /s/ W.M. Blumenshine
- ---------------------                    ------------------------
                                         Name: W.M. Blumenshine
/s/ Rhonda Vaughn                        Title: Attorney-in-Fact
- ---------------------





WITNESSES:                               RIDGEWOOD ENERGY CORPORATION


/s/ Randy Bennett                        By: /s/ W. Greg Tabor
- ---------------------                    ------------------------
                                         Name: W Greg Tabor
/s/ Harvey Dupry                         Title: Executive Vice President
- ---------------------








                                   EXHIBIT "A"

                                 [NEWFIELD LOGO]

                                December 19, 2006

Christina Barker Linscomb
Landmark

     Apache Corporation
     2000 Post Oak Blvd., Suite 100
     Houston, TX 77056
     Attn. Mr. Darrell Donaldson

            Re: Farmout Agreement
                Main Pass Block 275; OCS-G 15395
                Federal Offshore Louisiana

     Gentlemen:

     The Farmout Agreement dated July 7, 2006, between Newfield Exploration
     Company and Apache Corporation provides that subject to rig availability,
     weather conditions and acquiring all necessary permits, Newfield shal1
     commence the drilling of the OCS-G 15395 No. A-3 Well ("Initial Test Well")
     on the Lease on or before January 1, 2007.

     The Ocean Summit has been contracted to drill the Initial Test Well and is
     currently under tow to the Main Pass Area, but has been delayed by weather.

     Due to the delay of the Ocean Summit, Newfield respectfully requests an
     extension to commence drilling the Initial Test Well until January 30,
     2006.

     If you an in agreement to extend the commencement date of the Initial Test
     Well, please indicate your approval by executing in the space below and
     returning one copy to the undersigned at your earliest convenience.

     Sincerely,

     /s/ Chris Linscomb
     Christina B. Linscomb


     AGREED TO ON THIS 21ST DAY OF DECEMBER, 2006.

     APACHE CORPORATION

     By: /s/ C.R. Harden
     Name: C.R. Harden
     Title: Land Manager, Gulf Coast Region

        Newfield Exploration Company 363 N. Sam Houston Pkwy E Suite 2020
             Houston, Texas 77060 (281) 647-6074 Fax (281) 405-4207





                                   EXHIBIT "A"

Attached to and made a part of that certain Participation Agreement dated
December 13, 2006 by and between Newfield Exploration Company and Ridgewood
Energy Corporation

                                FARMOUT AGREEMENT
                            MAIN PASS AREA, BLOCK 275
                               OFFSHORE LOUISIANA

This Farmout Agreement ("Agreement") is entered into the 7th day of July, 2006
(the "Effective Date"), between Apache Corporation ("Farmor") and Newfield
Exploration Company ("Farmee"). Farmor and Farmee and their respective
successors and assignees (if any) may sometimes individually be referred to as
"Party" and collectively as the "Parties". This Agreement is entered into by the
parties hereto pursuant to that certain Option Agreement executed by Farmor and
Farmee and dated September 21, 2005.

                                   WITNESSETH:

WHEREAS, Farmor is the owner of OCS-15395, dated effective September 1, 1995,
between the United States of America, acting through the Director, Bureau of
Land Management, as LESSOR, and Vastar Resources, Inc., as LESSEE, covering and
affecting lands described as all of Block 275, Main Pass Area, containing
4994.55 acres, more or less (the "Lease"); and

WHEREAS, Farmor is willing to assign and transfer to Farmee the right to acquire
one hundred percent (100%) of Farmor's interests in the Lease limited to the
Southwest Quarter (SW/4), INSOFAR AND ONLY INSOFAR as the lease covers depths
from the surface down to 11,400' TVD or the stratigraphic equivalent depth of
the top of the 11,100' sand as seen at 11,051' TVD in the Vastar Resources,
Inc.'s OCS-G 15395 A-2 Well, whichever is shallower, and further limited to the
area situated Southward of the Northwest-Southeast Fault, immediately south and
separate from the.A-1 ST well, and northwest of the A-2 well ("Contract Area"),
in accordance with the terms set forth herein and Farmee wishes to acquire such
interest; and

WHEREAS, Farmee represents and warrants to Farmor that Farmee is duly qualified
with the United States Minerals Management Service ("MMS") to do business in the
Outer Continental Shelf, Gulf of Mexico; and

WHEREAS, this Agreement implements an election by Farmor, pursuant to that
certain Option Agreement dated September 21, 2005, between the Parties, to
farmout its interest in the Contract Area and not to participate in Farmee's
proposed OCS-G 15395 Well No. A-3.


NOW THEREFORE, in consideration of the premises and the mutual covenants and
obligations set out below and to be performed, the Parties agree as follows:


                                       1



                                       I.
                                INITIAL TEST WELL
                                -----------------

A.   Subject to rig availability, weather conditions and acquiring all necessary
permits, Farmee will commence or cause to be commenced the drilling of the OCS-G
15395 Well No. A-3 ("Initial Test Well") on or before January 1, 2007, from the
MP 275 A Platform at a surface location of 2,474' FSL and 5,656' FWL of Main
Pass Block 275. The well will be drilled in accordance with Farmee's AFE No.
10400 and to a proposed depth of 11, 200' TVD or to a depth sufficient to test
the 10,800' sand, whichever is lesser, with a BHL location of approximately
2,977' FSL and 5,320' FWL of Main Pass Block 275 ("Objective Depth").

B.   Farmee shall not commence operations under this Agreement until Farmor has
received a fully executed copy of this Agreement, Farmee has been designated as
Operator for conducting operations under this Agreement and Farmee has acquired
all the necessary permits.

C.   The Initial Test Well, Subsequent well(s) or any Substitute Well (defined
in Section II below) drilled under the terms of this Agreement, shall be drilled
free of any cost and/or liability of any kind or character to Farmor, and all
risk, liability, costs or expenses incurred in connection with drilling,
testing, completing, operating and associated tie-in of said well(s) and/or
plugging or abandoning said well(s) shall be borne solely by Farmee.

D.   Notwithstanding anything as stated in this Agreement above, Farmee shall
have the right, but shall not be obligated to drill or commence drilling the
Initial Test Well of any other well under the terms of this Agreement. If Farmee
fails to timely commence drilling the Initial Test Well, Farmee will suffer no
penalty other than the forfeiture of all rights under this Agreement.

                                       II.
                     SUBSTITUTE WELL AND SUBSEQUENT WELL(S)
                     --------------------------------------

A.   If, during the drilling of the Initial Test Well or a Substitute Well (as
defined in this paragraph), Farmee encounters impenetrable substances or
conditions, including loss of the hole due to mechanical difficulties, which in
the opinion of a reasonably prudent Operator under the same or similar
conditions would render further drilling impractical or hazardous, and such
condition prevents further drilling of the well, Farmee may commence another
well ("Substitute Well"), provided actual drilling of this Substitute Well is
commenced within one hundred and twenty (120) days after release of the drilling
rig and is drilled pursuant to all the terms and provisions of this Agreement
applicable to the well for which it is substituted.

B.   If the Initial Test Well or any Substitute Well therefore reaches Objective
Depth but does not qualify as an Earning Well as described in Section III below,
Farmee shall have the continuing right to drill a further additional well
("Subsequent Well") on the Contract Area provided that each such Subsequent Well
shall be subject to all the terms and provisions of this Agreement, and further
provided that Farmee commences actual drilling operations on such Subsequent
Well within one hundred and eighty (180) days from the release of the drilling
rig used for the prior well.

C.   After drilling the Earning Well, Farmee shall have the right, but not the
obligation, to drill additional wells (an "Additional Well") within the Contract
Area, provided that Farmee commences drilling operations on such well or wells
within one hundred and eighty (180) days of completion or plugging of the last
well drilled, to earn deeper depths if the Earning Well was not drilled to
Deepest Earning Depth (defined in Section II below).


                                       2



                                      III.
                                 INTEREST EARNED
                                 ---------------

A.   Should Farmee drill the Initial Test Well or a Subsequent Well (or a
Substitute Well for either the Initial Test Well or a Subsequent Well) to the
Objective Depth, comply with the terms of this Agreement, and the well meets the
criteria of a well capable of commercial production as provided under 30 CFR
250.115 or 30 CFR.250 116 (or if not meeting these qualification requirements
the Farmee nevertheless completes and equips said well for the production) and
Farmee commences actual production within one (1) year of release of the
drilling rig, then said well shall be deemed the "Earning Well" and Farmor shall
execute and deliver to Farmee an assignment in the operating rights to the
Contract Area. The Assignment shall:

     1.   be prepared by Farmor and delivered to Farmee within sixty (60) days
     of a well being deemed and Earning Well, with the effective date of the
     assignment being the date that the well is deemed an Earning Well;

     2.    be without warranty of title, statutory, express or implied, other
     than a limited warranty by, through and under Farmor, and subject only to
     the MMS reserved royalty interest, and the ORRI, as hereinafter defined,
     reserved by Farmor as provided in Section III.A.6 below and any overriding
     royalty interest of other burdens affecting the Contract Area and filed of
     record as of April 28, 2005;

     3.   be subject to the approval of the authorized officer of the MMS;

     4.   convey to Farmee all of Farmor's interest in and to the operating
     rights in the Contract Area, from the surface to the stratigraphic
     equivalent of the total depth drilled in the Earning Well plus one-hundred
     feet (100'), (the "Assigned Premises"). Notwithstanding the above, in no
     event shall Farmee earn an interest in depths below the depth of 11,400'
     TVD or the stratigraphic equivalent depth of the top of the 11,100' sand as
     seen at 11,051' TVD in the Vastar Resources, Inc.'s OCS-G 15395 A-2 Well,
     whichever is shallower (the "Deepest Earning Depth");

     5.   reserve to Farmor all rights to drill through the Assigned Premises
     in order to explore, develop and/or operate all rights owned by Farmor
     below the Assigned Premises or on lands pooled, or to be pooled, unitized
     or communitized therewith; and

     6.   reserve to Farmor an overriding royalty interest ("ORRI") in the
     Assigned Premises, including the Earning Well, of eight and one-third
     percent (8.33333%) of al liquid and/or gaseous hydrocarbon substances
     produced and/or saved, either through testing or production within the
     Assigned Premises.

B.   Farmor's ORRI shall be computed in the same manner and paid at the same
time as the Lessor's royalty under the Lease and shall be free and clear of al
royalty (other than MMS royalty), overriding royalty, and other burdens
associated with production and all costs and expenses of drilling and
production, except that the ORRI shall be charged with and bear its
proportionate part of ad valorem, production, severance; excise and other
similar taxes on production. In the event the interest owned by Farmor in the
Assigned Premises is less than a full leasehold interest, then the ORRI retained
by Farmor and the interest earned by Farmee shall be proportionately reduced.


                                       3



C.   Farmee shall not earn an interest in nor assume any additional liability
associated with any well, platform, facility, or pipeline currently located on
the Lease or within the Contract Area, except as may be provided in Sections IV
or VI of this Agreement or under any production handling agreement or platform
sublease agreement to be entered into pursuant to this Agreement. Except as
provided Sections IV and VI of this Agreement or under any production handling
agreement or platform sublease agreement to be entered into pursuant to this
Agreement, Apache shall retain one hundred percent (100%) of its rights,
liabilities and interests in any such well, platform, facility or pipeline(s)
currently located on the Lease or within the Contract Area as of the date
hereof, including, but not limited to, the obligation to abandon same.

D.   The purpose of this paragraph is to set out the conditions under which
Farmee may produce oil and/or gas production from the Contract Area.

     1.   Exhibit "C" attached hereto sets forth each of the producing
     reservoirs ("PDP Zones"), and proved developed behind pipe reservoirs
     ("PDBP Zones") encountered in either of the Main Pass 275 A-1 and A-2
     wellbores (the Apache Wells") and the corresponding bottom hole pressures
     in the applicable Apache Well(s) with respect to each PDP Zone.

     2.   Farmor will not produce or cause to be produced any new wells or
     sidetrack existing any wells on MP 275 which would compete with or drain
     reserves discovered by any wells drilled pursuant to this Farmout Agreement
     in which Newfield is allowed to produce under the provision of Section
     III.D.4. below.

     3.   Farmee may drill wells to any zones in the Contract Area. In the
     event the Initial Test Well, Substitute Well or any Additional Well
     encounters a PDBP Zone, Farmee agrees not to produce such PDBP Zone until
     such time as all Apache Well(s) have ceased to produce from such zone.

     4.   In the event the Initial Test Well, Substitute Well or any Additional
     Well encounters a PDP Zone, Farmee will take a bottom hole pressure in such
     well in such PDP Zone (such pressure to be obtained through MDT or
     equivalent pressure testing tool or actual stabilized shut in bottom hole
     pressure as measured by a downhole pressure gauge). Farmee will adjust such
     measured bottom hole pressure to account for any difference in true
     vertical depth between the PDP Zone in the Initial Test Well, Substitute
     Well or any Additional Well and the mid point of the perforations in the
     PDP Zone in the Apache Well(s) so that the pressures will be compared at a
     common datum. Farmee will calculate this adjustment by subtracting the true
     vertical depth subsea of the PDP in the Initial Test Well, Substitute Well
     or any Additional Well from the true vertical depth subsea of the midpoint
     of the perforations of PDP Zone in the Apache Well(s), and multiplying such
     difference in true vertical depth by the appropriate pressure gradient as
     determined through the above mentioned pressure measurement techniques, or
     in the absence of measured pressure gradients then at 0.15 psi/ft. If such
     adjusted bottom hole pressure is greater than or equal to the result
     obtained by subtracting 250 psi from the original bottom hole pressure for
     the corresponding PDP Zone in the applicable Apache Well(s) (as set forth
     on Exhibit "C")., then Farmee may produce that PDFP Zone from such well
     without delay. Should the adjusted bottom hole pressure for the PDP Zone in
     the Initial Test Well, Substitute Well or any Additional Well be more than
     250 psi below the original bottom hole pressure for the corresponding PDP
     Zone in the applicable Apache Well(s) (as set forth on Exhibit "C"), then
     Farmee may not produce such well in such PDP Zone until such PDP Zone
     ceases to produce from the Apache Well(s) or is abandoned to a different
     zone. In the event Farmee is prohibited from immediately producing any PDP
     Zone because of the conditions contained in this paragraph, then
     notwithstanding the above, Farmee may make a written request that Farmor


                                       4



     permit Farmee to produce oil and/or gas production from such PDP Zone,
     provided, however, Farmor may at its sole discretion withhold such consent.

E.   In the event Farmee fails to commence production from the Earning Well (or
any subsequent well drilled pursuant to the Agreement) within two (2) years from
rig release on the Earning Well then, unless (i) Farmee can demonstrate a good
faith effort on its part in attempting to initiate the sale of production from
Contract Area or (ii) Farmee's production is delayed under Section III.D. above,
Farmee will reassign to Farmor any interest assigned to Farmee in the Contract
Area.

F.   Upon the total cessation of production from all wells drilled under this
Agreement for consecutive period of one hundred twenty days (120) days, during
which period of time no operations are being conducted on the Contract Area in a
good faith effort to re-establish production, or one hundred twenty (120) days
after completion of any good faith effort to reestablish production, Farmee will
reassign to Farmor any interest earned under this Agreement unless Farmee can
demonstrate to Farmor that reasonable circumstances exist which prohibit Farmee
from conducting operations to re-establish production, but that Farmee is
preparing to conduct such operations no later than one hundred fifty (150) days
following such total cessation of production.

G.   Any interest assigned from Farmee to Farmor shall be free and. clear of any
liens, claims or other .burdens created by, through or under Farmee.

                                       IV.
                          PRODUCTION HANDLING AND FEES
                          ----------------------------

A.   Subject to Farmor's facility and equipment capacity limitations, Farmee
shall have the option, but not the obligation, to process its Contract Area
production through Farmor's existing production handling facilities located on
Main Pass Block 289. Farmor and Farmee shall endeavor and attempt to enter into
a mutually acceptable production handling agreement which will incorporate,
among other provisions, processing and handling rates of .13/mcf for gas,
$.85/bbl for oil and condensate, $.85/bbl for water, $.05/mcf per stage of
compression and a monthly operating fee of $10,000;00 for the first well and
$5,000.00 for each additional well for manned facility or $12,500.00 for the
first well and $5,000.00 for each additional well for an unmanned facility
(collectively "Fees"). In any month in which there is production from the
Contract Area, and there is sufficient available facility and equipment
capacity, and if the Fees excluding the monthly contract operating fee do not
equal or exceed $12,500.00 in any calendar month, then a minimum fee of
$12,500.00 will be charged to Farmee in lieu of fees based upon throughput for
such month, regardless of actual throughput. In any month in which there is no
production from the Contract Area and there is sufficient available facility and
equipment capacity to meet the minimum monthly fee, the minimum monthly fee
shall not exceed $7,500.00. The Fees (excluding the minimum monthly fee) will be
adjusted on the first day of April of each year, beginning in April, 2007, by
the relevant increases or decreases in the Overhead Adjustment Index as such is
published by the council of Petroleum Accountant societies or COPAS (the "COPAS
Index").

B.   To the extent equipment or facilities on Farmor's Platform must be
installed, redesigned or modified in order to accommodate production from any
well(s) drilled pursuant to this Agreement, all costs and expenses associated
therewith shall be borne by the parties participating in the drilling of any
such well(s) in proportion to their working interest. Notwithstanding anything
contained herein to the contrary, in the event Farmor processes its gas at third
party facilities, then Farmor shall not be obligated to provide production
handling services as provided in this paragraph.

C.   Notwithstanding the above, in the event Farmor determines in its sole
discretion that it is uneconomic to continue to process the Farmee's production
at Farmor's production facilities, then Farmor discontinue the production


                                       5



handling services upon thirty (30) days' written notice to Farmee. In such case,
and subject to any priority rights under existing agreements, Farmor and Farmee
will attempt to negotiate (i) the terms of a purchase and sale agreement for the
sale of the production facilities and platform to Farmee; or (ii) or platform
sublease agreement to allow continued production from wells drilled pursuant to
this Agreement. In the event the parties cannot reach an agreement within ninety
(90) days after Farmor's notice to Farmee as provided above, then the production
handling agreement shall terminate.

                                       V.
                                  DOWNTIME FEES
                                  -------------

A.   In addition to the Fees as provided in Section 3.(a), Farmee shall pay a
downtime fee ("Downtime Fee") to Farmor as compensation for the production
downtime attributable to Farmor's production (not to include third part PHA
revenue or volumes) which is required to be shut-in due to operations conducted
on any well(s) drill pursuant to this Option Agreement. The Downtime Fee shall
be calculated on an hourly basis as follows:

          Total Downtime Fee = (AxB) x C
                               ---------
                                  45x24

          Where:

          A = number of hours of Downtime per Downtime event less the initial
              forty eight (48) hours of downtime at no charge
          B = Processor's total daily net working interest production in mcf
              for previous forty-five (45) days
          C = Processor's average commodity sale price (net of any
              transportation, gathering fuel and other marketing costs which
              would have been reasonable incurred), during the period of any
              Downtime

Notwithstanding the above, the Downtime Fee shall be charged for the first
forty-eight (48) hours of downtime and the Downtime Fee will be capped at
seventy-two (72) hours production equivalent at which time Farmor, it its
option, may recommence its production that was shut-in as a result of the one
hundred twenty (120) hour downtime.

                                       VI.
                                    SLOT FEES
                                    ---------

A.   To the extent Farmee intends to utilize an available open slot on a Farmor
platform, Farmee shall pay a slot fee equal to $100,000 gross per well per slot
utilized to Farmor on behalf of the platform owners. In addition, Farmee will be
responsible for its proportionate share (based on Farmee's working interest in
such well(s) of all plugging and abandonment (P&A) costs in accordance with MMS
requirements associated with any well(s) drilled from an existing slot of a
Farmor platform or any existing wellbore from an Farmor platform which may be
re-entered and sidetracked. Farmee further agrees that it will not sidetrack any
existing well(s) without first obtaining Farmor's prior written consent. Should
Farmee re-enter and sidetrack an existing well from the Farmor platform,
Farmee's assumption of P&A liability for such wells will be in lieu of the slot
fee.


                                       6



                                      VII.
                            INFORMATION REQUIREMENTS
                            ------------------------

Farmee shall deliver to Farmor, free of cost, the information set out in Exhibit
"A", attached hereto, and all other geological and geophysical, engineering,
technical, production test, exploratory, and reservoir information, and any logs
or other information and data that Farmee might acquire from the Initial Test
Well or any other well drilled by Farmee hereunder but only to the extent that
such information is not restricted by licensing agreements.


                                      VIII.
                                 CONFIDENTIALITY
                                 ---------------

A.   The term "Confidential Information" shall mean any and all information
delivered by Farmee to Farmor pursuant to Section VII above include any
geological, geophysical, engineering, technical, production test, exploratory,
or reservoir information, or any logs. Confidential Information shall be the
property of the Parties and shall be maintained by Farmor as confidential for a
period of two (2) years from the effective date of this Agreement or until such
information is made public by a governmental authority, whichever is earlier.
Each Party shall use at least the same degree of care in protecting the
Confidential Information as it uses in protecting its own proprietary materials.

B.   Farmor shall not have any obligation to limit disclosure or use of any
portion of. Confidential Information which:

     1.   is already in Farmor's possession prior to receipt hereunder;

     2.   is now in or hereafter becomes publicly available through no fault of
          Farmor;

     3.   is disclosed to Farmor without obligation of confidence by a third
          party which has the right to make such disclosure; or

     4.   is independently developed by or for Farmor without reference to
          Confidential Information received under this Agreement.

C.   Any Party may make Confidential Information available to third parties
without the consent of the other Party as follows:

     1.   to a consultant or engineering firm for hydrocarbon reserve or other
          technical evaluation; analysis or interpretation or for reprocessing,
          provided that such consultant or engineering firm is not allowed to
          retain a copy of the Confidential Information after completion of its
          services and agrees in writing to treat it as confidential;

     2.   to show, but not provide copies, to a third party with which a Party
          is negotiating sale of all or part of its interest in the Contract
          Area, or a possible merger or consolidation or sale of its business
          operations; provided that such third party or parties agree in writing
          to hold all such Confidential Information in confidence. In the event
          of completion of a transaction contemplated by this Section VIII.C.2.,
          a copy of all Confidential Information may be provided to the
          successor in interest of such Party and such Party may also retain
          copies for the Confidential Information with all the rights and
          obligations which it had prior to the completion of the transaction;


                                       7



     3.   to show and provide copies of the Confidential Information to an
          Affiliate (as hereinafter defined) or financial institutions provided
          that such Affiliate or financial institutions agree to be bound by the
          confidentiality provisions of this Agreement. "Affiliate" shall mean
          any company or legal entity which (i) controls either directly or
          indirectly a Party, or (ii) which is controlled directly or indirectly
          by such Party, or (iii) is directly or indirectly controlled by a
          company or entity which directly or indirectly controls such Party.
          "Control" means the right to exercise fifty percent (50%) or more of
          the voting rights in the appointment of the directors or managers of
          such company or legal entity.

     4.   to show the Confidential Information to and provide copies thereof to
          agencies of federal and state governments having jurisdiction to the
          extent required by applicable law, rule or regulation, provided that
          such Party shall take all actions to require the confidential
          treatment of the Confidential Information which is disclosed.

                                       IX.
                                CONSENT TO ASSIGN
                                -----------------

Except for assignments to affiliates of Farmee, internal partners of Farmee or
financial institutions as part of a financing arrangement, Farmee may not assign
any rights under this Agreement without the prior written consent of Farmor, and
any assignment made without such consent shall be void. Such request shall
contain the name, address and percentage of participation of the proposed
assignee. Should Farmee request Farmor's consent to assign to a willing and
financially able party, Farmor's consent shall not be unreasonably withheld.
Notwithstanding Farmor's consent to assign, Farmee shall remain fully liable to
Farmor for the performance of all obligations incurred prior to the effective
date of the assignment under this Agreement. All assignments shall be made
expressly subject to this Agreement and Farmor, shall not be, under any
obligation to recognize any assignment of this Agreement pursuant to the terms
hereof unless and until it has received from Farmee a true and correct copy of
same and assignee has ratified this Agreement.

                                       X.
                                    INDEMNITY
                                    ---------

FARMEE SHALL RELEASE, DEFEND, INDEMNIFY, AND HOLD FARMOR, ITS AFFILIATES AND
CONTRACTORS, AND EACH OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, OR REPRESENTATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS AND ASSIGNS
HARMLESS, TO THE MAXIMUM EXTENT PERMITTED BY LAW, FROM AND AGAINST ANY CLAIMS,
LIABILITIES, AND LOSSES FOR INJURY, DEATH OR DAMAGE OF EVERY KIND AND CHARACTER
TO PERSONS, PROPERTY OR THE ENVIRONMENT (INCLUDING, BUT NOT LIMITED TO THE COST
OF LITIGATION AND ATTORNEY'S FEES INCURRED IN CONNECTION WITH THE SAME) ARISING
OUT OF OR IN CONNECTION WITH FARMEE'S OPERATIONS CONDUCTED. ON THE LEASE
PURSUANT TO THE TERMS OF THIS AGREEMENT, OR FARMEE, ITS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS OR REPRESNETATIVES, CONTRACTORS, SUBCONTRACTORS, SUCCESSORS,
AND ASSIGNS; PROVIDED THAT IF ANY SUIT IS FILED ON ANY CLAM, FARMEE SHALL
IMMEDIATELY NOTIFY FARMOR OR PERMIT FARMOR TO PARTICIPATE IN THE DEFENSE THEREOF
WITHOUT WAIVER OR IMPAIRMENT OF FARMEE INDEMNITIES TO FARMOR; HOWEVER,THE ABOVE
SHALL NOT APPLY TO FARMOR IN THE EVENT OF FARMOR'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.


                                       8



                                       XI.
                            ASSUMPTION OF LIABILITIES
                            -------------------------

A.   It is understood that Farmee shall assume all duties, responsibilities and
liabilities in connection with all of its operations on the Contract Area
limited to the interests subject to this Agreement, and that Farmee shall
perform all duties and make any and all filings and reports as necessary or
required by permits in connection with the drilling and plugging and abandoning
of any well or wells drilled under the terms of this Agreement. FARMEE DOES
HEREBY AGREE TO DEFEND, INDEMNIFY, RELEASE AND HOLD HARMLESS FARMOR FROM AND
AGIANST ANY SUCH DUTIES, RESPONSIBILITIES AND LIABILITIES.

B.   Although Farmor, as the current Operator, will provide Farmee copies of
permits and site data (including any shallow hazard surveys, bathymetry reports,
and any soil boring reports) if and when available, FARMOR MAKES NO WARRANTY,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND HEREBY EXPRESSLY DISCLAIMS ALL
SUCH WARRANTIES, AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION, PERMITS
OR DATA SO FURNISHED. FARMEE HEREBY EXPRESSLY ASSUMES THE RISK OF THE
INNACCURACY OR INCOMPLETENESS OF SUCH INFORMATION, PERMITS OR DATA ASSUMES
THE RISK OF THE INACCURACY OR INCOMPLETENESS OF SUCH INFORMATION, WAIVES ANY
CLAIMS AGAINST FARMOR REGARDING SUCH INFORMATION, PERMITS OR DATA, AND
ACKNOWLEDGES THAT, WITHOUT SUCH WAIVER, FARMOR WOULD NOT FURNISH SUCH
INFORMATION, PERMITS OR DATA.

C.   Notwithstanding the above, neither Party hereto shall be liable in an
action initiated by one (1) against the other for special, indirect,
consequential, exemplary or punitive damages resulting from or arising out of
this Agreement, including, without limitation, loss of profit or business
interruptions, however same may be caused.

                                      XII.
                                SEVERAL LIABILITY
                                -----------------

The Parties hereby agree that the respective obligations and liabilities of the
Parties under this Agreement shall be several, not joint or collective, and each
Party shall be responsible for its own obligations. It is not the intention of
the Parties to create, nor shall this Agreement be construed as creating, a
mining or other partnership, agency or association between the Parties or to
render them liable as partners, agents or associates.

                                      XIII.
                                   COMPLIANCE
                                   ----------

Farmee shall comply with all laws and regulations applicable to any activities
carried out by Farmee under the provisions of this Agreement and any amendments
hereto. Farmee agrees to immediately notify Farmor of any material failures to
comply with applicable laws or regulations, AND AGREES TO RELEASE, INDEMNIFY,
DEFEND, AND HOLD HARMLESS FARMOR FROM AND AGAINST ANY AND ALL LOSSES,
LIABILITIES, CLAIMS, DEMANDS, ORDERS, JUDGMENTS, NOTICES, DAMAGES OR OTHER
MATTERS, WHETHER SIMILAR OR DISSIMILAR IN NATURE WHICH MAY ARISE FROM FARMEE'S
FAILURE TO COMPLY WITH SUCH LAWS AND REGULATIONS.


                                       9



                                      XIV.
                                    INSURANCE
                                    ---------

A.   During the term of this Agreement, Farmee shall maintain insurance
coverage, with reasonable deductibles and insurers acceptable to Farmor, as set
forth in Exhibit "B ". Farmee shall also require its contractors and
subcontractors to carry prudent insurance coverage for the types of operations
undertaken. Any deficiencies in the insurance policies of Farmee's contractors
and subcontractors shall be the sole responsibility of Farmee. It is expressly
understood and agreed that the coverages required in Exhibit "B" represent
Farmee's minimum insurance requirements and are not to be construed to fund or
limit the liability of any indemnity obligations that are undertaken by Farmee
in this Agreement.

B.   With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance hereunder, including those insurance
policies required of Farmee's contractors and/or subcontractors, shall waive
their rights of subrogation against Farmor, their subsidiary and affiliated
companies, their directors, officers, employees, agents, representatives,
invitees, co-lessees, co-owners, partners, joint venturers, contractors and
subcontractors, and their insurers, and each of their respective successors,
spouses, relatives, dependents, heirs and estates.

C.   With respect to the liabilities assumed in this Agreement, the insurers of
the specified policies of insurance required hereunder shall include Farmor and
their subsidiary and affiliated companies as additional insureds. However, this
provision shall not apply to the Workers' Compensation policies of either Farmee
or of its contractors and/or subcontractors.

D.   Prior to any .work commencing under this Agreement, Farmee shall furnish
Farmor with certificates of insurance indicating that the required insurance
policies are in full force, and that such policies shall not be cancelled
without (30) days prior written notice to Farmor.

                                       XV.
                               REPORTING ACCURACY
                               ------------------

All financial settlements, billings and reports rendered to Farmor by Farmee and
all bills given to Farmee by Farmor pursuant to this Agreement and/or any
amendments, shall reflect properly the facts about all activities and
transactions. Each Party agrees to notify the other Party promptly upon
discovery of any instance where it has reason to believe data supplied is no
longer accurate or complete.

                                      XVI.
                                  AUDIT RIGHTS
                                  ------------

Farmor, upon written notice to Farmee, shall have the right, for a period of
twenty-four (24) months from the end of the calendar year in which a payout
statement or ORRI disbursement is or should have been received, to audit
Farmee's records of all proceeds, ORRI disbursements and the rights of Farmor
pursuant to this Agreement.

                                      XVII.
                                  WELL TAKOVER
                                  ------------

A.   If Farmee elects to permanently abandon any well drilled under this
Agreement provided that Farmee does not wish to use the well to sidetrack,
deepen or otherwise utilize the wellbore for its own account as a Substitute
Well or Additional Well, then Farmor shall have the option to take over said
well for any purpose. If Farmee elects to abandon such a well, it shall give
notice to Farmor within forty-eight (48) hours (inclusive of weekends and
holidays) of making its decision to so abandon. Within ten (10) business days


                                       10



after receipt of such notice, or if a drilling rig is on location, within
forty-eight (48) hours, inclusive of weekends and holidays, Farmor shall notify
Farmee whether it elects to exercise its option. Failure to respond timely shall
be deemed a negative election.

B.   If Farmor exercises the option to take over the well, it shall be entitled
to operate the well in conjunction with any facilities which are or would have
been connected with operation of the well, and Farmor shall further be entitled
to produce the well from any zone, formation, or reservoir previously
encountered in the well to be taken over whether or not the zone, formation, or
reservoir has been previously completed. In the event Farmor exercises such well
takeover option, it shall pay Farmee the salvage value of the well and
associated equipment (including the salvage value of the platform and facilities
associated with the well), if any, less the estimated costs of salvaging and
shall thereafter assume all further risk, responsibility and expense of plugging
and abandoning the well. If Farmor elects not to take over the well, then Farmee
shall thereafter promptly plug and abandon it and any associated flowline or
pipeline in accordance with all the rules and regulations of the MMS.

                                     XVIII.
                              RIGHTS TO PRODUCTION
                              --------------------

Each Party shall own and have the right to receive in-kind and to separately
dispose of its proportionate share of the oil and gas production from Assigned
Premises.

                                      XIX.
                           LEASE MAINTENANCE PAYMENTS
                           --------------------------

Farmor shall pay any rentals and/or minimum royalty necessary to perpetuate the
Lease; provided however, Farmor may be relieved of such obligation at such time
as all wells on the Lease in which Farmor has a working interest are no longer
capable of producing in Farmor's sole judgment and Farmor give Farmee notice at
least sixty (60) days prior to any payment due date, and thereafter Farmee shall
be responsiblefor such payments. Upon the written request of a non-paying Party,
the Party responsible for making the rental or minimum royalty payments shall
provide proof of any such payment.

                                       XX.
                                 APPLICABLE LAW
                                 --------------

THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED THEREIN
DISREGARDING ANY CONFLICT OF LAWS RULE WHICH WOULD RESULT IN THE APPLICATION OF
THE LAWS OF ANY OTHER JURISDICTION; PROVIDED, HOWEVER, THAT NO LAW, THEORY, OR
PUBLIC POLICY SHALL BE GIVEN EFFECT WHICH WOULD UNDERMINE, DIMINISH, OR REDUCE
THE EFFECTIVENESS OF THE WAIVER OF DAMAGES PROVIDED IN THE PRECEDING SECTION
XI.C ABOVE, IT BEING THE EXPRESS INTENT, UNDERSTANDING, AND AGREEMENT OF THE
PARTIES THAT SUCH WAIVER IS TO BE GIVEN THE FULLEST EFFECT, NOTWITHSTANDING THE
NEGLIGENCE (WHETHER SOLE, JOINT OR CONCURRENT), GROSS NEGLIGENCE, WILLFUL
MISCONTDUCT, STRICT LIABILITY OR OTHER LEGAL FAULT OF PARTY. In the event this
Agreement or such operations, or any part thereof, contemplated hereby are found
to be inconsistent with or contrary to any such laws, rules, regulations or
orders, the laws, rules, regulations or orders shall be deemed to control and
this Agreement shall be regarded as modified accordingly and as so modified
shall continue in full force and effect.


                                       11



                                      XXI.
                                  MISCELLANEOUS
                                  -------------

A.   Except as otherwise provided for in this Agreement and the Option
Agreement, this Agreement contains and comprises the entire agreement between
the Parties regarding the Lease and Contract Area and supersedes any previous
negotiations or documents related thereto. Any amendments, changes or
modifications to the rights and obligations of the Parties hereto shall be in
writing and shall be effective only when agreed in writing by all Parties.
Farmor makes no warranty, statutory; express or implied, with respect to its
ownership in the Lease, except by, through or under Farmor.

B.   The section headings used herein are for convenience only and shall not be
construed as having any substantive significance or as indicating that all of
the provisions of this Agreement relating to any particular topic are to be
found in any particular section.

C.   All notices given hereunder, except information as specified in Exhibit
"A", shall be given to the Parties at the following addresses:

                     Apache Corporation
                     2000 Post Oak Blvd, Suite 100
                     Houston, TX 77056
                     Attn:    Land Manager - Offshore Region
                     Telephone:        (713) 296-6349
                     Facsimile:        (713) 296-7024

                     Newfield Exploration Company
                     363 N. Sam Houston Parkway E, Suite 2020
                     Houston, Texas 77060
                     Attn:    Land Manager - Gulf of Mexico
                     Telephone:        (281) 847-6131
                     Facsimile:        (281) 847-6094

D.   All notices hereunder shall be deemed given for all purposes if in writing
and delivered personally, sent by documented mail or overnight delivery service
or, to the extent receipt is confirmed, telecopy, facsimile or other electronic
transmission service to the appropriate address or number set forth above, and
deemed delivered when received.

E.   All obligations imposed by this Agreement on each Party, except for the
payment of money and providing of indemnification, shall be suspended and all
periods of time for exercising any rights hereunder shall be extended while
compliance is prevented, in whole or in part, by a labor dispute, fire, flood,
hurricane, war, civil disturbance, or act of God; by laws; by governmental
rules, regulations, or orders; by governmental action or governmental delay; by
inability to obtain a rig or secure materials; or by any other cause, whether
similar or dissimilar, beyond the reasonable control of the said Party;
provided, however, that performance shall be resumed within a reasonable time
after such cause has been removed; and provided further that no Party shall be
required against its will to settle any labor dispute ("Force Majeure").
Whenever a Party's obligations or rights are suspended or extended hereunder,
such Party shall immediately notify the other Party, giving full particulars of
the reason for such suspension or extension, and such Party shall thereafter
diligently endeavor to remove or correct the cause of such Force Majeure event
as soon as reasonably possible. If necessary to maintain the Lease (or either of
them) in full force and effect, Farmor will provide Farmee with all reasonable
assistance in filing for and seeking MMS approval of a Suspension of
Operations/Production ("SOP") (or such other documents, applications and
requisite governmental permits) to cover a time period adequate to allow Farmee
to obtain all necessary drilling permits and


                                       12



until a rig is in place. In the event an SOP is obtained, which extends the time
period during which drilling operations and/or production must be commenced or
obtained in order to maintain the Lease, the Parties shall amend the first
paragraph of Section I of this Agreement to make the mandatory commencement date
for the Initial Test Well consistent with any extension provided under the
MMS-approved SOP or other authority.

F.   Any overriding royalty, production payment, or net profits interest burden
that may be created by Farmor subsequent to the date of the Letter of Intent
dated April 28, 2005 other than the ORRI reserved by Farmor under this Agreement
("Excess Burdens") shall not burden, in any manner, the interests that Farmee
may earn.

G.   The Exhibits to this Agreement, listed below, are hereby incorporated
herein for all intents and purposes.

          Exhibit "A" -- Well Information
          Exhibit "B" -- Farmee's Insurance Provisions
          Exhibit "C" -- Existing Reservoirs

If the foregoing terns and conditions are acceptable to Farmee, please execute
and return an original to.

FARMOR

Apache Corporation

By: /s/ C. R. Harden
    ----------------
Name:   C. R. Harden
Title:  Land Manager - Gulf Coast Region
Date: 7/17/06
     --------

FARMEE

Newfield Exploration Company

By: /s/ W. M. Blumenshine
    ---------------------
Name:   W. M. Blumenshine
Title:  Land Manager
Date:   8/2/2006
     -----------


                                       13



                                 EXHIBIT "A"

  Attached to and made a part of that certain Farmout Agreement between Apache
        Corporation and Newfield Exploration Company dated July 7, 2006


                          WELL INFORMATION REQUIREMENTS
                           FOR NON-OPERATED PROPERTIES

TO:               Newfield Exploration Company
PROSPECT:         Main Pass Block 275
                  OCS-G 15395, Farmout Wells
OFFSHORE/STATE:   Offshore Louisiana

PLEASE SEND THE NUTMBER OF COPIES INDICATED FOR EACH OF THE DATA LISTED BELOW
TO:

                          Apache Corporation
                          2000 Post Oak Blvd., Suite 100
                          Houston, Texas 77056-4400
                          Attn: Joe Young
                          ---------------

                            PRIOR TO SPUDDING - DATA
- --------------------------------------------------------------------------------
No. of Copies
- -------------
        1         Application for Well Permit
        1         Wellsite Survey Plat
        1         Drilling AFE with Drilling Program
        1         Drilling Geological Prognosis
        1         Notice of Spudding

                                 AFTER SPUDDING
- --------------------------------------------------------------------------------
                  Daily Well Report:
                  E-mail to:   Joe Young       at joe.young@apachecorp.com
                               Dan Moore       at daniel.moore@apachecorp.com
                               Kathy Mangum    at kathy.mangum@apachecorp.com

Daily transmission of mud log data and MWD/LWD data e-mailed to Joe
Young and Dan Moore.
        1         LAS Format w/TIFF images
        2         DST or FT Data
        3         Field Print of all Log Runs
        2         Preliminary Core and Fluid Analyses
        2         Directional Surveys
        1         Notice of Abandonment
        1         Completion Program






                                DURING COMPLETION
- --------------------------------------------------------------------------------
No. of Copies
- -------------
        3         All Logs Run After Setting Production Casing
        3         Perforation Records
        3         Complete Description of Stimulation Treatments
        3         Daily Reports during Production

                         AFTER COMPLETION OR ABANDONMENT
- --------------------------------------------------------------------------------
NUMBER OF COPIES
- ----------------
        3         Drilling and Completion Reports, DST Charts
        3         Final Copies of:
                  Fluid and Core Analyses
                  Sample Descriptions
                  Paleo
                  Mud Logs
                  Directional Surveys, etc.
        6         Final hard copies of 1"& 5" Log Prints 1 CD with TIFF images
                  of all wireline
                  logs & tests
        1         Composite LAS Format on CD Rom
        1         Copies of all Reports Sent to Regulatory Bodies

ADDITIONALLY:
- -------------
          All 1" and 5" logs through all objective and other hydrocarbon bearing
          sands after being logged, should be e-mailed or faxed to:

                  Joe Young at joe.young@apachecorp.com
                  Dan Moore at daniel.moore@apachecorp.com

                  Joe Young at fax: (713) 296-6461 (routine office hours)

          Any digital well data from the rig (i.e. log curves, directional
          survey information) should be e-mailed to joe.young@apachecorp.com


          PRIOR TO LOGGING, PLEASE NOTIFY:
          Geologist:
          ----------
          Joe Young              Office:    (713) 296-6567
                                 Home:      (281) 360-9568
                                 Cell:      (713) 501-9866
          Reservoir Engineer:
          -------------------
          Dan Moore              Office:    (713) 296-6351
                                 Home:      (281) 373-9044
                                 Cell:      (281) 627-0312






                                   EXHIBIT "B"
      Attached to and made a part of that certain Farmout Agreement between
     Apache Corporation and Newfield Exploration Company dated July 7, 2006

                          FARMEE'S INSURANCE PROVISIONS

Farmee shall secure and maintain and/or cause its contractors and subcontractors
to arrange and maintain the following insurance coverages:

     A. Farmee will ensure that all personnel, whether employees, agents,
representatives, consultants, contractors or subcontractors involved with the
operations contemplated in, this Agreement are covered by Worker's Compensation
and Employer's Liability Insurance in accordance with all applicable federal,
state and maritime laws (including the Longshoremen's and Harbor Worker's' Act
and its extension by the Outer Continental Shelf Lands Act, the Death on the
High Seas Act and the Jones Act) covering Farmee's personnel, with limits for
Employer's Liability Insurance, including Maritime Employer's Liability, of not
less than $1,000,000 per occurrence. If applicable, such insurance shall include
a territorial extension covering the area of the Gulf of Mexico where the
operations under this Agreement are to be performed.

     B. General Liability Insurance, with limits of liability for bodily injury
and property damage of not less than $1,000,000 any occurrence. Such insurance
shall provide coverage for pollution liability and contractual liability, and
should also include the following:
     1.   Territorial extension to include coverage for the area of the Gulf of
          Mexico where the operations under this Agreement are to be performed.
     2.   "In rem" endorsement, stating that an action "in rem" shall be treated
          as a claim against the insured "in personam"

     C. Aircraft Liability Insurance for any of Farmee's operations that may
require the use of aircraft, including helicopters, secured by either Farmee or
the aircraft owner, with a combined single limit of no less than $5,000,000 per
occurrence covering public liability, passenger liability, and property damage
liability. Such insurance shall cover all owned and non-owned aircraft,
including helicopters, used by Farmee or its contractors or subcontractors in
connection with its operations contemplated in this Agreement.

     D. Excess liability insurance over the liability insurance policies listed
above with limits of not less than $25,000,000.

     E. During any drilling, completion, plugging, workover or recompletion
activity on any well drilled hereunder, Operator's Extra Expense insurance, with
a minimum limit of $35,000,000, which includes coverage for Control of Well,
Pollution Liability and Cleanup, Deliberate Well Firing, Making Wells Safe and
voluntary Removal of Wreck/Debris whether such removal is at the request of a
government authority of Farmor.

     F. Vessel P&I and Hull Insurance secured by Farmee or the vessel owner for
all vessels owned, chartered or operated by Farmee, its contractors or
subcontractors in performance of operations contemplated in this Agreement
secured by either Farmee or the vessel owner. The Hull insurance shall be in an


                                       17


amount equal to the value of the vessel(s), and the P&I insurance shall be in an
amount equal to the value of the vessel(s) or $10,000,000, whichever is greater.

     G. With respect to its offshore operations, Farmee shall comply with all
applicable governmental regulations including the demonstration of Oil Spill
Financial Responsibility for its offshore facilities. Farmor has agreed to
undertake the obligation to assume OSFR demonstration to the MMS on behalf of
Farmee with respect to the operations contemplated herein.
     H. Operators Care Custody and Control Limit of not less than $2,000,000.



             The remainder of this page is left blank intentionally








                                       18

EX-10.4

                                                                    Exhibit 10.4


                             PARTICIPATION AGREEMENT
                                 Gulf of Mexico
                             2007 Multi Well Program

     This Participation Agreement ("Agreement") is made and entered into
effective as of the 1st day of November, 2006 by and between LLOG Exploration
Offshore, Inc. ("LLOG"), and Ridgewood Energy Corporation ("Ridgewood"). LLOG
and Ridgewood are sometimes hereafter referred to collectively as "Parties" and
individually as "Party."

                                    RECITALS

     WHEREAS, on October 11, 2006 the Parties have executed that certain Letter
Agreement ("Letter Agreement") wherein LLOG and Ridgewood agreed to jointly
drill the six (6) OCS Prospects as more fully described on Exhibit "A-1"
attached hereto and made a part hereof; and

     WHEREAS, in accordance with the Letter Agreement, LLOG plans to drill, and
operate, the six (6) OCS Prospects to the Objective Depths on those Leases
defined on Exhibit "A" and Ridgewood hereby agrees to participate with LLOG in
the drilling of the six (6) OCS Prospects; and

     WHEREAS, the Parties have agreed to participate in the drilling and
evaluation of the Initial Test Well on each Prospect based on the following
interests ("Participating Interests");

             LLOG Exploration Offshore, Inc.              33.33%
             Ridgewood Energy Corporation                66.67%


     NOW, THEREFORE, in consideration of the mutual covenants and agreement
herein contained, the Parties hereto agree as follows:


1.     DRILLING COSTS / CASING POINT
       -----------------------------

The Parties agree to assume their proportionate share of the costs to drill and
evaluate the Initial Test Well ("ITW") for each Prospect based on the
Participating Interests set forth above. The costs to drill and evaluate the 1TW
to "Casing Point" for each Prospect shall be detailed in an AFE which will be
furnished by LLOG no less than forty -five (45) days prior to the anticipated
spud for each Prospect. "Casing Point" means that point in time when the
applicable ITW for Prospect has been drilled to Objective Depth (as defined on
Exhibit "A-1") and after all logs, cores and other approved tests have been
conducted which are necessary to reach the decision for further operations,
other than plugging and abandoning, in the ITW. It is understood that Casing
Point shall include plugging and abandonment costs in the event the ITW is not
completed for production or temporarily abandoned in contemplation of further
operations. Within five (5) business days of Ridgewood's receipt of each such
AFE, Ridgewood will confirm its participation by execution of the applicable
AFE. However, Ridgewood shall not be liable to LLOG or suffer any penalty for
failure to approve any AFE provided. If Ridgewood does not approve an AFE as
provided by LLOG then the applicable Prospect will be dropped from this




Agreement and the terms and provisions of this Agreement will continue and
remain in effect for the remaining undrilled Prospects.

The ITW costs shall continue to be shared based on the Participating Interests
until the ITW reaches Casing Point or the actual costs to drill and evaluate the
applicable Prospect reaches 110% of the approved AFE ("Promote Cap"), whichever
occurs first. Thereafter, all further costs of the ITW including but not limited
to any sidetrack or completion, and all associated costs including but not
limited to jacket, pipeline and facility costs shall be shared on a 50/50 basis
by LLOG and Ridgewood.

LLOG, as Operator, shall have the right to require the Parties to pay advances
in accordance with the terms of the COPAS attached to the Offshore Operating
Agreement ("JOA") attached hereto and made a part hereof as Exhibit "C".


2.     REIMBURSABLE LAND COSTS
       -----------------------

Within fifteen (15) days of execution of each Prospect's applicable AFE,
Ridgewood shall reimburse LLOG for its 50% share of the applicable Prospect's
"Sunk Land Costs". The Sunk Land Costs are set forth on Exhibit "B" attached
hereto.

3.     SUBSTITUTE WELL
       ---------------

If during the drilling of the ITW LLOG encounters impenetrable substances or
conditions, including loss of hole due to mechanical difficulties, which in the
opinion of a reasonably prudent operator under the same or similar conditions,
would render further drilling impracticable or hazardous and the condition
prevents further drilling of the ITW, LLOG may commence a "Substitute Well",
provided the drilling operations on such Substitute Well are commenced within
one hundred fifty (150 ) days after release of the drilling rig from the ITW.
However, with respect to such Substitute Well, the Promote Cap applicable to the
original AFE shall not be adjusted upward in the event the cumulative costs of
the ITW and the Substitute Well, as the case may be, exceed the original Promote
Cap.


4.     EARNING EVENT / ASSIGNMENT OF RECORD TITLE
       ------------------------------------------

At such time as the ITW is drilled to Casing Point and Ridgewood has satisfied
the monetary obligations set forth in Articles 1 and 2 above, LLOG shall execute
and deliver to Ridgewood an Assignment of Record Title Interest delivering to
Ridgewood a 50% Record Title Interest in each Lease so earned. The Assignments
shall be without warranty of title, either express or implied, except by,
through and under LLOG, but not otherwise. Additionally, such Assignment shall
be subject to the approval of the authorized officer of the U.S. Mineral
Management Service. However, in said Assignment, LLOG shall deliver to Ridgewood
the net revenue interest set forth on Exhibit "B" attached hereto attributable
to its 50% record title interest.


5.     JOINT OPERATING AGREEMENT
       -------------------------

At such time each ITW reaches Casing Point and Ridgewood earns the interest set
forth herein, the relationship of the Parties shall henceforth be governed by
the Joint Operating Agreement attached hereto as Exhibit "C". Such JOA shall be
deemed a separate agreement for each Lease and at such time as Ridgewood has


                                       2


earned a Lease in accordance with 4 above, LLOG and Ridgewood shall enter into a
JOA covering such earned Lease. Such separate JOA shall be identical to the JOA
executed herein but in the case where other parties (which parties are listed on
Exhibit "A" to the JOA) are participating in the Lease, LLOG shall attempt to
have such parties execute the same JOA.


6.     INFORMATION REQUIREMENTS
       ------------------------


During the drilling of the ITW for each Prospect, LLOG shall deliver to
Ridgewood the G&G and well information as provided in the applicable JOA.



7.     CONFIDENTIALITY/ PRESS RELEASES
       -------------------------------

The Parties shall adhere to the Confidentiality Provisions, including
information relative to press releases, contained in the attached JOA for all
operations subject to this Agreement.


8.     CONSENT TO ASSIGN
       -----------------

Ridgewood may not assign any rights under this Agreement without LLOG's prior
written consent. At such time as Ridgewood has earned an assignment in a given
Lease as set forth herein, the rights and obligations associated with any
assignment shall be subject to the applicable JOA. Notwithstanding the above,
LLOG hereby waives its right to consent to any future assignment to be made by
Ridgewood to one or more of its wholly managed and controlled Drilling Fund
LLC(s).

With respect to Ship Shoal Block 81, OCS-G 26056, LLOG and Ridgewood will be
joined by a third party, Shoreline Southeast LLC (an affiliate of Shoreline
Energy, and hereinafter referred to as "Shoreline"). Shoreline's Participating
Interests on Ship Shoal 81 will be 26.67%, which will become 20% at such time as
the ITW reaches Casing Point or the Promote Cap, whichever occurs first.
Otherwise, Shoreline shall be subject to the identical terms and conditions
contained in this Agreement, but applicable only to Ship Shoal 81. Ridgewood's
Participating Interests and the interest to be earned upon reaching Casing Point
or the Promote Cap shall not be affected as a result of Shoreline's
participation.


9.     INDEMNITY / LIABILITY / INSURANCE
       ---------------------------------

With respect to indemnities, liabilities and insurance matters, beginning with
the commencement of operations for each ITW and Substitute Well, if applicable,
the Parties agree to be bound by and subject to the provisions of the JOA.


                                       3


10.    TIMELY OPERATIONS
       -----------------

LLOG will diligently and timely move forward in securing a rig(s) necessary to
drill the Prospects as soon as possible. LLOG commits to Ridgewood to spud the
first Prospect on or before February 1, 2007. LLOG further commits to Ridgewood
to having commenced operations on each of the six (6) Prospects by December 31,
2007, subject only to rig availability and obtaining the required permits.
However, LLOG's commitment to drill and evaluate drill and evaluate West Delta
67 is contingent of the results of the ITW on the adjacent West Delta Block 68.
The Parties will confer immediately upon obtaining the results of the West Delta
Block 68 ITW to make that determination. LLOG shall not be liable to Ridgewood
or sufer any penalties for failure to spud any Prospect after December 31, 2007.


11.    AUDIT RIGHTS
       ------------

Ridgewood shall have the right of audit for a period of twenty-four (24) months
from the end of each calendar year to audit LLOG's records for operations
conducted during such year as a result of this Agreement.


12.    LEASE MAINTENANCE PAYMENTS
       --------------------------

The Parties agree to jointly share lease maintenance costs which accrue during
the term of this Agreement on a 50/50 basis. LLOG shall make a bona fide effort
to make the payments, but shall not be responsible to the other Party for losses
or damages resulting from its failure to do so. Upon written request of a
non-paying Party, the Party responsible for making the rental payment or minimum
royalty payments shall provide proof of payment.


13.    APPLICABLE LAW
       --------------

THE LEASE AND ALL OPERATIONS CONDUCTED BY THE PARTIES SHALL BE SUBJECT TO ALL
VALID AND APPLICABLE FEDERAL LAWS, RULES, REGULATIONS AND ORDERS ("FEDERAL
LAW"). THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
GENERAL MARITIME LAW OF THE UNITED STATES. TO THE EXTENT REQUIRED BY FEDERAL
LAW, THE LAWS OF THE STATE ADJACENT TO THE LEASE SHALL APPLY. THIS AGREEMENT
SHALL OTHERWISE BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE
LAWS OF THE STATE OF LOUISIANA, EXCLUSIVE OF ANY PROVISIONS THAT WOULD DIRECT
THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION. ANY ACTION
PERMITTED BY THIS AGREEMENT TO BE COMMENCED IN COURT SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN FEDERAL OR STATE COURT LOCATED IN HARRIS COUNTY,
TEXAS, AND EACH PARTY WAIVES ANY OBJECTION IT MAY HAVE TO THIS VENUE.

In the event this Agreement or the operations, or any part thereof, contemplated
hereby are found to be inconsistent with or contrary to any laws, rules,
regulations or orders, the laws, rules, regulations or orders shall be deemed to
control and this Agreement shall be regarded as modified accordingly and as so


                                       4


modified shall continue in full force and effect.


14.    TERM
       ----

This Agreement shall terminate at such time as all Assignments provided for in
Article 4 have been filed and accepted by the Minerals Management Service.
Thereafter all operations to be conducted for the joint benefit of the Parties
shall be subject to the applicable JOA.


15.    SECTION HEADINGS
       ----------------

The section headings used herein are for convenience only and shall not be
construed as having any substantive significance or as indicating that all of
the provisions of this Agreement relating to any particular topic are to be
found in any particular section.


16.    FORCE MAJEURE
       -------------

All obligations imposed by this Agreement on each Party, except for the payment
of money and providing of indemnification, shall be suspended and all periods of
time for exercising any rights shall be extended while compliance is prevented,
in whole or in part, by a labor dispute, fire, flood, hurricane, war, civil
disturbance, or act of God; by laws; by governmental rules, regulations, or
orders; by governmental action or governmental delay; by inability to obtain a
rig or secure materials; or by any other cause, whether similar or dissimilar,
beyond the reasonable control of the Party; provided, however, that performance
shall be resumed within a reasonable time after the cause has been removed; and
provided further that no Party shall be required against its will to settle any
labor dispute.

Whenever a Party's obligations or rights are suspended or extended, the Party
shall immediately notify the other Party, giving full particulars of the reason
for the suspension or extension, and the Party shall diligently endeavor to
remove or correct the cause of the Force Majeure event as soon as reasonably
possible.


17.    SUBSEQUENT BURDENS
       ------------------

Any overriding royalty, production payment or net profits interest burden that
may be created subsequent to the date of this Agreement ("Excess Burdens"),
shall be the sole responsibility and borne out of the interest of the Party
creating the burden.


18.    MISCELLANEOUS
       -------------

This Agreement contains and comprises the entire agreement between the Parties
regarding the Lease and supersedes any previous negotiations or documents
related to it.


                                       5


This agreement shall be deemed for all purposes as prepared through the joint
efforts of the parties and shall not be construed against one party or the other
as a result of the preparation, submittal, or other event of negotiation,
drafting, or execution hereof.

Any amendments, changes or modifications to the rights and obligations of the
Parties shall be in writing and shall be efective only when agreed in writing by
all Parties.

This Agreement, together with all of its exhibits, is intended by the Parties to
be a complete and final statement of the agreement of the Parties with respect
to the subject matter hereof, and supersedes any prior oral or written
statements or agreements between the Parties hereto.

In the event of a conflict between the terms and provisions of this Agreement
and the JOA, the terms of this Agreement shall control.


19.    NOTICES
       -------

All notices, requests or demands to be given under this Agreement shall be in
writing and directed to the persons at the following address/contact
information:


     LLOG Exploration Offshore, Inc.           Ridgewood Energy Corporation
     11700 Old Katy Road, Suite 295            11700 Old Katy Road, Suite 280
     Houston, Texas 77079                      Houston, Texas 77079
     Attn: Mr. Thomas A. Burnett               Attention: Mr. Greg Tabor
     Phone: 281.752.1103                       Phone: 281.293.8449
     Fax: 281.752.1190                         Fax: 281.293.7705
     Email thomasb@llog.com                    Email gtabor@ridgewoodenergy.com


IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the date first set forth above.


                                         LLOG EXPLORATION OFFSHORE, INC.




                                         /s/ Thomas A. Burnett
                                         ---------------------
                                         Thomas A. Burnett
                                         Manager of Business Development
                                         RIDGEWOOD ENERGY CORPORATION


                                         /s/ W. Greg Tabor
                                         -----------------
                                         W. Greg Tabor
                                         Executive Vice President


                                       6


                                   EXHIBIT "A"
                                  ------------
                   Attached to and made a part of that certain
             Participation Agreement dated November 1, 2006, by and
                    between LLOG Exploration Offshore, Inc.,
                          Ridgewood Energy Corporation
- --------------------------------------------------------------------------------


Description of Leases:


     Oil and Gas Lease bearing Serial Number OCS-G 25995, effective May 1, 2004,
     covering all of Vermilion Block 344, from the United States of America, as
     Lessor, to LLOG Exploration Offshore, Inc., as Lessee, containing
     approximately 3,378.08 acres, more or less.


     Oil and Gas Lease bearing Serial Number OCS-G 26056, effective July 1,
     2004, covering all of Ship Shoal Block 81, from the United States of
     America, as Lessor, to LLOG Exploration Offshore, Inc., as Lessee,
     containing approximately 5,000 acres, more or less.


     Oil and Gas Lease bearing Serial Number OCS-G 24389, effective October 1,
     2002, covering all of Galveston Block A-248, from the United States of
     America, as Lessor, to LLOG Exploration Offshore, Inc., as Lessee,
     containing approximately 5,760 acres, more or less.


     Oil and Gas Lease bearing Serial Number OCS-G 24874, effective July 1,
     2003, covering all of South Marsh Island Block 111, from the United States
     of America, as Lessor, to LLOG Exploration Offshore, Inc., as Lessee,
     containing approximately 2,828.95 acres, more or less.


     Oil and Gas Lease bearing Serial Number OCS-G 27179, effective May 1, 2005,
     covering all of the North-Half of West Delta Block 67, from the United
     States of America, as Lessor, to LLOG Exploration Offshore, Inc., as
     Lessee, containing approximately 2,500 acres, more or less.


     Oil and Gas Lease bearing Serial Number OCS-G 27180, effective May 1, 2005,
     covering all of the North-Half of West Delta Block 68, from the United
     States of America, as Lessor, to LLOG Exploration Offshore, Inc., as
     Lessee, containing approximately 1,832.53 acres, more or less.


                                       7

                                  EXHIBIT "A-1"
                                 --------------
                   Attached to and made a part of that certain
             Participation Agreement dated November 1, 2006, by and
                    between LLOG Exploration Offshore, Inc.,
                          Ridgewood Energy Corporation
- --------------------------------------------------------------------------------


Description of Objective Depth:


Vermilion Block 344 - is an Ang. B amplitude supported objective at
     approximately 8,500' TVD and approximately 9,000' MD.


Ship Shoal Block 81 - is a Tex X 2, 3, and 4 Sand amplitude supported objective
     at approximately 9,500' TVD and will be drilled as a straight hole.


Galveston A-248 - is a Lower Lenticulina amplitude supported objective at
     approximately 7,500' TVD and will be drilled as a straight hole.


South Marsh Island Block 111 - is a Pleistocene amplitude supported objective at
     approximately 8,600' TVD and will be drilled as a straight hole.


West Delta Block 67 (N/2) - is an Upper Miocene (Cyclam. 3 and Cris K) objective
     at approximately 11,200' TVD and 13,140' MD. Contingent upon the results of
     the Initial Test Well to be drilled by LLOG on the adjacent West Delta
     Block 68 as set forth below, this Prospect may not be drilled.


West Delta Block 68 (N12) - is an Upper Miocene (Cyclam. 3 and Cris K) objective
     at approximately 13,250' TVD and 13,940' MD.


                                       8


                                   Exhibit "B"
                                   -----------

     Attached to that certain Participation Agreement dated November 1, 2006
         by and bewtween LLOG Exploration Offshore, Inc. and Ridgewood



                                       LLOG      NRI                      Other               Sunk
      Area/Block           LLOG WI   Net NRI   818ths     Bonus $      Land Costs      Land Costs (8/8THS)
  ------------------------------------------------------------------------------------------------------------

                                                                   
Galveston A-248                95%   77.27%    81.33%   $ 220,000.00   $ 144,000.00    $        364,000.00
Ship Shoal 81                 100%   83.33%    83.33%   $ 577,000.00   $  75,000.00    $        652,000.00
South Marsh Island 111        100%   81.33%    81.33%   $ 441,000.00   $ 106,580.00    $        547,580.00
Vermilion 344                  95%   77.27%    81.33%   $ 135,600.00   $  50,685.00    $        186,285.00
West Delta 67 (N/2)           100%   80.83%    80.83%   $ 305,000.00   $  25,000.00    $        330,000.00
West Delta 68 (N12)           100%   80.83%    80.83%   $ 610,000.00   $  18,330.00    $        628,330.00
                                                                                       $      2,708,195.00

EX-10.5

[LOGO OMITTED] Ridgewood Energy                         W. Greg Tabor
                                                        Executive Vice President
March 7, 2007


El Paso E & P Company, LLP
1001 Louisiana Street
Houston, TX 77002

Attention: Mr. Anthony Wiltz

Re: Offer to Participate-
    ---------------------
    West Cameron Block 75, OCS-G 22505 #2 Well
    Offshore, Louisiana

Gentlemen:

Whereas El Paso E&P Company, L.P. ("EP") is marketing certain working interest
participation percentage in the West Cameron Block 75, OCS-G 22505 #2 Well
Offshore Louisiana, ("The Well") and has made said working interest available to
Ridgewood Energy Corporation ("REC").

Whereas EP is desirous of selling said working interest participation percentage
in The Well and REC desires to acquire a specified level of working interest
participation percentage in The Well,, REC hereby submits below the terms and
conditions of a participation proposal to acquire said working interest and net
revenue interest in The Well, and enter into a formal Participation Agreement
with EP under the following general terms and conditions:

     1.   REC hereby agrees to execute the EP AFE dated January 18, 2007 for the
          drilling and or plugging and abandonment of The Well in the amount of
          $42,772,550.00 thereby evidencing agreement to participate and pay 45%
          of the costs being $19,247,647.00 net to REC. REC's 45% participation
          level will be capped at 100% of the $42,772,550.00 DHC. At such time
          as the DHC reach $42,772,550.00 all further REC well costs will be at
          the 40% working interest participation level.

     2.   In return for REC agreeing to participate in The Well and evidencing
          said participation by executing the above referenced AFE, EP shall
          immediately but no later than 10 business days upon REC's execution of
          AFE, convey to REC a 40% operating rights interest in The Well and any
          production thereof via an MMS acceptable form of assignment and
          therein EP shall reserve a 1% of 6th/6th ORRI.

     3.   REC's participation rights hereunder shall be strictly governed and


    11700 Old Katy Road, Suite 280, Houston, TX 77079 o T: (281) 293-8449
                               F: (281) 293-7705
              gtabor@ridgewoodenergy.com o www.ridgewoodenergy.com




          subject to that certain Offshore Operating Agreement dated August 20,
          2004 between EL Paso Production Company as Operator and Chevron
          U.S.A., Inc. and Merit Energy Partners formerly The Houston
          Exploration Company as Non-operators (the "JOA").

     4.   The parties acknowledge the acreage on which The Well is located was
          previously dedicated to Triton Gathering, LLC and Stingray Pipeline
          Company, LLC. Accordingly, should The Well be successfully completed
          and result in production, EP and REC agree, EP will market REC's share
          of gas production pursuant to the terms provided under the JOA for the
          term of REC's working interest ownership in The Well. EP will pay REC
          based on the actual price received at the onshore interconnects with
          Stingray by EP for the month, net of actual Stingray transport cost
          incurred, minus $0.17 per mmbtu for as long as EP pays a firm demand
          charge under its Triton Gathering Agreement then such fee shall be
          reduced to EP's actual transport charge at Triton. EP shall make
          payment to REC on the 25th of the month following the month of
          production via wire transfer.

          EP agrees to timely and formally request and maintain sufficient
          capacity to enable EP to market REC's share of oil and gas under its
          Triton Firm Gathering Agreement and its Stingray Pipeline Transport
          Agreement(s).

     5.   EP and REC agree that REC shall be entitled to its proportionate share
          of Royalty Relief granted to the WC 75 lease block, OCS G22505 by the
          MMS.

     6.   [PARAGRAPH DELETED] BJB

     7.   This offer is subject to all final due diligence by REC. EP shall
          provide Ridgewood with full and complete access to EP's files, records
          and data, so that Ridgewood may perform its due diligence review of
          EP's acquisition, ownership and obligations associated with the lease.
          Additionally, EP shall provide REC with access to technical data
          associated with the exploration prospect(s), including seismic, maps,
          well data and geologic data (including EP's interpretive data),
          subject however, to all confidentiality and license restrictions.

This foregoing proposal by REC to EP expresses our intent to participate in the
above referenced well subject to the terms and conditions stated herein.




Should you wish to accept this offer and the foregoing terms and conditions are
acceptable to you, please execute two copies of this letter and return one copy
by fax to: (281) 293-7391; and one original to my attention at the letterhead
address. Should you have any questions regarding this offer, please contact
Randy Bennett at (281) 293-9384 or the undersigned at (281) 293-8449.

This offer to participate by REC is subject to REC's final management approval
and shall remain open until the end of business, or 5:00 pm, on Friday, March 9,
2007, after which such time the offer will terminate.

Very truly yours,


/s/ W. G. Tabor
W. Greg Tabor
Executive Vice President



AGREED TO AND ACCEPTED THIS 12th DAY OF March 2007.

BY: /s/ [ILLEGIBLE SIGNATURE]
   --------------------------

TITLE: President
       ---------

                          [SEAL OMMITED]




IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement as of the date indicated below, but
effective as of the date first above written.


WITNESSES:                               EL PASO PRODUCTION COMPANY


/s/ [ILLEGIBLE SIGNATURE]                By: /s/ William M. Griffin
- -------------------------                    ----------------------
                                             William M. Griffin
/s/ [ILLEGIBLE SIGNATURE]                    Vice President
- -------------------------

                                                                  [SEAL OMITTED]

                                         THE HOUSTON EXPLORATION COMPANY


                                         By:
- -------------------------                    ----------------------
                                             Tracy Price
                                             Senior Vice President - Land
- -------------------------


                                         CHEVRON U.S.A. INC


/s/ [ILLEGIBLE SIGNATURE]                By: /s/ B.G. McCloskey
- -------------------------                    ----------------------
                                             B.G. McCloskey
/s/ [ILLEGIBLE SIGNATURE]                    Assistant Secretary
- -------------------------


                                         RIDGEWOOD ENERGY CORPORATION


/s/ [ILLEGIBLE SIGNATURE]                BY:  /s/ W. G. Tabor
- -------------------------                    ----------------------
                                             W. Greg Tabor *
/s/ [ILLEGIBLE SIGNATURE]                    Executive Vice President
- -------------------------



       (Signature Page for Offshore Operating Agreement covering Block 75,
         West Cameron Area, Lease No. OCS-G 22505, Offshore Louisiana)


  *Attached to and made part of that certain Offer to Participate letter dated
     March 7, 2007, between El Paso E&P Company, L.P., and Ridgewood Energy
                                  Corporation.


                                       70


IN WITNESS WHEREOF, each Party, through its duly authorized agent or
representative, has executed this Agreement as of the date indicated below, but
effective as of the date first above written.


WITNESSES:                               EL PASO PRODUCTION COMPANY


                                         By:
- -------------------------                    ----------------------
                                             William M. Griffin
                                             Vice President
- -------------------------



                                         THE HOUSTON EXPLORATION COMPANY


/s/ [ILLEGIBLE SIGNATURE]                By: /s/ Tracy Price
- -------------------------                    ----------------------
                                             Tracy Price
/s/ [ILLEGIBLE SIGNATURE]                    Senior Vice President - Land
- -------------------------



                                         CHEVRON U.S.A. INC


                                         By: /s/ B.G. McCloskey
- -------------------------                    ----------------------
                                             B.G. McCloskey
                                             Assistant Secretary
- -------------------------



      (Signature Page for Offshore Operating Agreement covering Block 75,
         West Cameron Area, Lease No. OCS-G 22505, Offshore Louisiana)




                                       70

EX-14

                                                                      Exhibit 14

                            THE RIDGEWOOD COMPANIES

                                 CODE OF ETHICS

     1.   Application and Purpose

     This Code of Ethics (this "Code") shall apply to all employees and officers
of Ridgewood Renewable Power, LLC, Ridgewood Energy Corporation, Ridgewood
Capital Management, LLC (the "Ridgewood Companies"), including employees and
officers of The Ridgewood Companies affiliates and subsidiaries ("Employees"),
including, but not limited to, the power trusts: Ridgewood Electric Power Trust
I, Ridgewood Electric Power Trust II, Ridgewood Electric Power Trust III,
Ridgewood Electric Power Trust IV, Ridgewood Electric Power Trust V, and The
Ridgewood Power Growth Fund (collectively the "Power Trusts"). Every Employee
must be familiar with and understand the provisions of this Code. The purpose of
this Code is to promote:

     o    Honest and ethical conduct, including the ethical handling of actual
          or apparent conflicts of interest between personal and professional
          relationships;

     o    Full, fair, accurate timely and understandable disclosure in reports
          and documents that the Power Trusts file with, or submits to, the
          United States Securities and Exchange Commission and, as to the Power
          Trusts and Ridgewood Companies, in other public communications;

     o    Compliance with applicable governmental laws, rules and regulations;

     o    The prompt internal reporting of violations of this Code; and

     o    Accountability for adherence to this Code.

     2.   Honest and Ethical Conduct

     All Employees shall perform their duties in an honest and ethical manner.
This includes:

     o    Avoiding situations in which their personal, family or financial
          interests conflict with those of the Ridgewood Companies;

     o    Refraining from engaging in any activities that compete with the
          Ridgewood Companies, or which may compromise its interests;

     o    Refraining from taking any business or investment opportunity
          discovered in the course of employment with or service to the
          Ridgewood Companies that the Employee knows, or should have or has
          reason to know, would benefit the Ridgewood Companies, or any of them;
          and

     o    Complying with all applicable governmental laws, rules and
          regulations.




     The Ridgewood Companies encourage Employees to avoid even the appearance of
a conflict of interest and to raise ethical questions, dilemmas concerns or
suggestions with appropriate individuals within the Ridgewood Companies,
including supervisors, managers, senior management, or human resources. The
Ridgewood Companies have since their inception encouraged such issues to be
raised and, based upon prior experience, many, if not most, of these issues can
be addressed informally, after appropriate discussion and analysis.

     If any Employee would feel uncomfortable in any way raising ethical issues
as set forth above, or if they raise such issues and they are not resolved
appropriately, then s/he should consult with the Manager of HR or the General
Counsel (the "Ethics Officer(s)"). The Ethics Officer(s) will also follow the
procedures described in Section 4 below. Any Employee who becomes involved in a
situation that gives rise to an actual conflict of interest must promptly inform
the Ethics Officer(s) of such conflict.

     3.   Full, Fair, Accurate, Timely and Understandable Disclosure

     The Ridgewood Companies are committed to ensuring that all disclosures in
reports and documents that the Power Trusts file with, or submits to the SEC, as
well as other public communications made by the Ridgewood Companies in general
are full, fair, accurate, timely and understandable. The Ridgewood Companies'
CEO and CFO ("Senior Officers") are ultimately responsible for taking all
necessary steps to ensure that this occurs. All Company Employees shall take
appropriate steps within their area of responsibility to ensure the same.

     4.   Internal Reporting of Code Violations

     Any Employee who in good faith believes or suspects that any portion of
this Code has been violated (including any violation of Section 3 of this Code)
and does not feel comfortable addressing the issue with individuals identified
in Section 2 should immediately report such violation to the Ethics Officer(s).
Any such report will be promptly evaluated and/or investigated. While the
Ridgewood Companies strongly prefer that any individual who wishes to make such
a complaint to identify him/herself (to assist in the understanding of the
concerns expressed), any person may make such a complaint anonymously. Any
person reporting such a violation should be prepared to provide as much detail
as possible about the suspected violation, including the individuals involved,
the nature of the violation, documentation of the violation, or any other
information which may be helpful in the Ridgewood Companies' evaluation and, if
necessary, investigation of the complaint. Prompt disclosure to the appropriate
parties is vital to ensure a thorough and timely evaluation and appropriate
resolution. A violation of this Code is a serious matter and could have legal
implications. Allegations of such behavior are not taken lightly and should not
be made to embarrass someone or put him or her in a false light. Therefore,
reports of suspected violations should always be made in good faith.

     5.   No Retaliation.

     The Ridgewood Companies will not tolerate any retaliation against any
person who provides information in good faith to the Ridgewood Companies or law
enforcement official concerning a possible violation of any law, regulation or
this Code. Any Employee who violates this rule may be subject to civil, criminal


                                       2


and administrative penalties, as well as disciplinary action, up to and
including termination of employment.

     6.   Consequences for Non-Compliance with this Code

     Corrective Actions. Any violation of applicable law or any deviation from
the standards embodied in this Code will result in appropriate corrective and/or
disciplinary action, up to and including termination of employment.

     Required Government Reporting. Whenever conduct occurs that requires a
report to the government, the Ethics Officer(s), shall be responsible for
complying with such reporting requirements.

     7.   Publication of this Code; Amendments and Waivers

     o    This Code will be posted and maintained on the Company's website and
          posting will be disclosed in each Power Trust's Annual Report on Form
          10-K.

     o    Any amendment to or waiver of this Code with respect to a Senior
          Officer of the a Power Trust:

          o    Shall be disclosed within five (5) days of such action in a
               filing on Form 8-K with the Securities and Exchange Commission.

          o    Shall be reported in the Power Trust's next periodic report with
               the SEC if not previously reported on a Form 8-K.

     o    Records of any disclosures relating to waivers of this Code shall be
          retained for no less than five years.



Adopted by March 1, 2004.