ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the transition period from _______________________to____________________________
|
Delaware
(State or other jurisdiction of
incorporation or organization)
|
26-0225130
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
☐ |
Accelerated filer
|
☐ |
Non-accelerated filer
(Do not check if a smaller reporting company)
|
☐ |
Smaller reporting company
Emerging growth company
|
☒
☐
|
PAGE
|
|||
PART I - FINANCIAL INFORMATION
|
|||
Item 1.
|
1 | ||
1 | |||
2 | |||
3 | |||
4 | |||
Item 2.
|
8 | ||
Item 3.
|
14 | ||
Item 4.
|
14 | ||
PART II - OTHER INFORMATION
|
|||
Item 1.
|
15 | ||
Item 1A.
|
15 | ||
Item 2.
|
15 | ||
Item 3.
|
15 | ||
Item 4.
|
15 | ||
Item 5.
|
15 | ||
Item 6.
|
16 | ||
16 |
|
September 30, 2017
|
December 31, 2016
|
||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$
|
2,288
|
$
|
2,794
|
||||
Salvage fund
|
37
|
-
|
||||||
Production receivable
|
305
|
606
|
||||||
Other current assets
|
109
|
137
|
||||||
Total current assets
|
2,739
|
3,537
|
||||||
Salvage fund
|
2,216
|
2,251
|
||||||
Oil and gas properties:
|
||||||||
Proved properties
|
42,373
|
39,513
|
||||||
Less: accumulated depletion and amortization
|
(21,639
|
)
|
(17,453
|
)
|
||||
Total oil and gas properties, net
|
20,734
|
22,060
|
||||||
Total assets
|
$
|
25,689
|
$
|
27,848
|
||||
|
||||||||
Liabilities and Members' Capital
|
||||||||
Current liabilities:
|
||||||||
Due to operators
|
$
|
892
|
$
|
787
|
||||
Accrued expenses
|
59
|
623
|
||||||
Current portion of long-term borrowings
|
3,051
|
1,753
|
||||||
Asset retirement obligations
|
37
|
-
|
||||||
Total current liabilities
|
4,039
|
3,163
|
||||||
Long-term borrowings
|
5,935
|
7,513
|
||||||
Asset retirement obligations
|
2,603
|
2,550
|
||||||
Other liabilities
|
60
|
60
|
||||||
Total liabilities
|
12,637
|
13,286
|
||||||
Commitments and contingencies (Note 4)
|
||||||||
Members' capital:
|
||||||||
Manager:
|
||||||||
Distributions
|
(7,964
|
)
|
(7,964
|
)
|
||||
Retained earnings
|
8,417
|
7,944
|
||||||
Manager's total
|
453
|
(20
|
)
|
|||||
Shareholders:
|
||||||||
Capital contributions (625 shares authorized;
|
||||||||
332.2918 issued and outstanding)
|
65,965
|
65,965
|
||||||
Syndication costs
|
(7,823
|
)
|
(7,823
|
)
|
||||
Distributions
|
(48,463
|
)
|
(48,463
|
)
|
||||
Retained earnings
|
2,920
|
4,903
|
||||||
Shareholders' total
|
12,599
|
14,582
|
||||||
Total members' capital
|
13,052
|
14,562
|
||||||
Total liabilities and members' capital
|
$
|
25,689
|
$
|
27,848
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Revenue
|
||||||||||||||||
Oil and gas revenue
|
$
|
1,361
|
$
|
851
|
$
|
5,262
|
$
|
1,406
|
||||||||
Expenses
|
||||||||||||||||
Depletion and amortization
|
601
|
403
|
4,186
|
586
|
||||||||||||
Management fees to affiliate (Note 2)
|
225
|
240
|
675
|
720
|
||||||||||||
Operating expenses
|
336
|
267
|
1,071
|
482
|
||||||||||||
General and administrative expenses
|
42
|
38
|
135
|
110
|
||||||||||||
Total expenses
|
1,204
|
948
|
6,067
|
1,898
|
||||||||||||
Income (loss) from operations
|
157
|
(97
|
)
|
(805
|
)
|
(492
|
)
|
|||||||||
Interest expense, net
|
(237
|
)
|
(163
|
)
|
(705
|
)
|
(162
|
)
|
||||||||
Net loss
|
$
|
(80
|
)
|
$
|
(260
|
)
|
$
|
(1,510
|
)
|
$
|
(654
|
)
|
||||
|
||||||||||||||||
Manager Interest
|
||||||||||||||||
Net income
|
$
|
110
|
$
|
41
|
$
|
473
|
$
|
9
|
||||||||
|
||||||||||||||||
Shareholder Interest
|
||||||||||||||||
Net loss
|
$
|
(190
|
)
|
$
|
(301
|
)
|
$
|
(1,983
|
)
|
$
|
(663
|
)
|
||||
Net loss per share
|
$
|
(574
|
)
|
$
|
(906
|
)
|
$
|
(5,967
|
)
|
$
|
(1,994
|
)
|
|
Nine months ended September 30,
|
|||||||
|
2017
|
2016
|
||||||
|
||||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$
|
(1,510
|
)
|
$
|
(654
|
)
|
||
Adjustments to reconcile net loss to net cash
|
||||||||
provided by (used in) operating activities:
|
||||||||
Depletion and amortization
|
4,186
|
586
|
||||||
Accretion expense
|
87
|
-
|
||||||
Amortization of debt discounts and deferred financing costs
|
105
|
35
|
||||||
Changes in assets and liabilities:
|
||||||||
Decrease (increase) in production receivable
|
301
|
(398
|
)
|
|||||
Decrease (increase) in other current assets
|
28
|
(115
|
)
|
|||||
Increase in due to operators
|
27
|
72
|
||||||
(Decrease) increase in accrued expenses
|
(300
|
)
|
159
|
|||||
Net cash provided by (used in) operating activities
|
2,924
|
(315
|
)
|
|||||
|
||||||||
Cash flows from investing activities
|
||||||||
Capital expenditures for oil and gas properties
|
(3,043
|
)
|
(2,276
|
)
|
||||
Increase in salvage fund
|
(2
|
)
|
(1
|
)
|
||||
Net cash used in investing activities
|
(3,045
|
)
|
(2,277
|
)
|
||||
|
||||||||
Cash flows from financing activities
|
||||||||
Long-term borrowings
|
-
|
1,500
|
||||||
Repayments of long-term borrowings
|
(385
|
)
|
-
|
|||||
Net cash (used in) provided by financing activities
|
(385
|
)
|
1,500
|
|||||
|
||||||||
Net decrease in cash and cash equivalents
|
(506
|
)
|
(1,092
|
)
|
||||
Cash and cash equivalents, beginning of period
|
2,794
|
2,191
|
||||||
Cash and cash equivalents, end of period
|
$
|
2,288
|
$
|
1,099
|
||||
|
||||||||
Supplemental disclosure of cash flow information
|
||||||||
Cash paid for interest, net of amounts capitalized
|
$
|
905
|
$
|
-
|
||||
|
||||||||
Supplemental disclosure of non-cash investing activities
|
||||||||
Due to operators for accrued capital expenditures for
oil and gas properties |
$
|
701
|
$
|
381
|
1. |
Organization and Summary of Significant Accounting Policies
|
2. |
Related Parties
|
3. |
Credit Agreement – Beta Project Financing
|
4. |
Commitments and Contingencies
|
· |
weather conditions;
|
· |
economic conditions, including demand for petroleum-based products;
|
· |
actions by OPEC, the Organization of Petroleum Exporting Countries;
|
· |
political instability in the Middle East and other major oil and gas producing regions;
|
· |
governmental regulations, both domestic and foreign;
|
· |
domestic and foreign tax policy;
|
· |
the pace adopted by foreign governments for the exploration, development, and production of their national reserves;
|
· |
the supply and price of foreign oil and gas;
|
· |
the cost of exploring for, producing and delivering oil and gas;
|
· |
the discovery rate of new oil and gas reserves;
|
· |
the rate of decline of existing and new oil and gas reserves;
|
· |
available pipeline and other oil and gas transportation capacity;
|
· |
the ability of oil and gas companies to raise capital;
|
· |
the overall supply and demand for oil and gas; and
|
· |
the price and availability of alternate fuel sources.
|
|
Total Spent
|
Total
|
|
||||||||||
|
Working
|
through
|
Fund
|
|
|||||||||
Project
|
Interest
|
September 30, 2017
|
Budget
|
Status
|
|||||||||
|
(in thousands)
|
|
|||||||||||
Producing Properties
|
|
||||||||||||
Beta Project
|
3.0%
|
$
|
24,648
|
$
|
28,218
|
The Beta Project is expected to include the development of five wells. Wells #1 and #2 commenced production during third quarter 2016 and fourth quarter 2016, respectively. Wells #3 and #4 commenced production during second quarter 2017 and third quarter 2017, respectively. Well #5 began drilling in third quarter 2017 and is expected to commence production in first quarter 2018. The Fund expects to spend $2.2 million for additional development costs and $1.4 million for asset retirement obligations.
|
|||||||
Cobalt Project
|
5.0%
|
$
|
2,368
|
$
|
2,481
|
The Cobalt Project, a single-well project, commenced production in 2009. Recompletions are planned for 2018 at estimated total costs of $45 thousand. The Fund expects to spend $68 thousand for asset retirement obligations.
|
|||||||
Liberty Project
|
12.0%
|
|
$
|
13,387
|
$
|
16,031
|
The Liberty Project, a single-well project, commenced production in 2010. After various shut-ins in late-2015 and early-2016, due to third-party facilities' repair and maintenance activities, the well resumed production in early-May 2016. The well was shut-in again in late-June 2017 due to gas dehydration unit work, resuming production in late-September 2017. The operator is currently flowing the well's current zone together with the behind-pipe zone at no cost to the Fund. The Fund expects to spend $2.6 million for asset retirement obligations.
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Revenue
|
||||||||||||||||
Oil and gas revenue
|
$
|
1,361
|
$
|
851
|
$
|
5,262
|
$
|
1,406
|
||||||||
Expenses
|
||||||||||||||||
Depletion and amortization
|
601
|
403
|
4,186
|
586
|
||||||||||||
Management fees to affiliate
|
225
|
240
|
675
|
720
|
||||||||||||
Operating expenses
|
336
|
267
|
1,071
|
482
|
||||||||||||
General and administrative expenses
|
42
|
38
|
135
|
110
|
||||||||||||
Total expenses
|
1,204
|
948
|
6,067
|
1,898
|
||||||||||||
Income (loss) from operations
|
157
|
(97
|
)
|
(805
|
)
|
(492
|
)
|
|||||||||
Interest expense, net
|
(237
|
)
|
(163
|
)
|
(705
|
)
|
(162
|
)
|
||||||||
Net loss
|
$
|
(80
|
)
|
$
|
(260
|
)
|
$
|
(1,510
|
)
|
$
|
(654
|
)
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
Number of wells producing
|
6
|
3
|
6
|
3
|
||||||||||||
Total number of production days
|
366
|
208
|
1,123
|
457
|
||||||||||||
Oil sales (in thousands of barrels)
|
28
|
19
|
104
|
31
|
||||||||||||
Average oil price per barrel
|
$
|
43
|
$
|
40
|
$
|
45
|
$
|
40
|
||||||||
Gas sales (in thousands of mcfs)
|
41
|
48
|
176
|
89
|
||||||||||||
Average gas price per mcf
|
$
|
3.39
|
$
|
2.24
|
$
|
3.01
|
$
|
1.88
|
|
Three months ended September 30,
|
Nine months ended September 30,
|
||||||||||||||
|
2017
|
2016
|
2017
|
2016
|
||||||||||||
|
(in thousands)
|
|||||||||||||||
Lease operating expense
|
$
|
213
|
$
|
171
|
$
|
728
|
$
|
351
|
||||||||
Insurance expense
|
68
|
82
|
171
|
104
|
||||||||||||
Accretion expense
|
29
|
-
|
87
|
-
|
||||||||||||
Transportation and processing expense
|
19
|
-
|
42
|
-
|
||||||||||||
Workover expense and other
|
7
|
14
|
43
|
27
|
||||||||||||
|
$
|
336
|
$
|
267
|
$
|
1,071
|
$
|
482
|
EXHIBIT
NUMBER
|
TITLE OF EXHIBIT
|
METHOD OF FILING
|
|
31.1
|
Filed herewith
|
||
31.2
|
Filed herewith
|
||
32
|
Filed herewith
|
10.3
|
Filed herewith
|
||
101.INS
|
XBRL Instance Document
|
Filed herewith
|
|
101.SCH
|
XBRL Taxonomy Extension Schema
|
Filed herewith
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase
|
Filed herewith
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
Filed herewith
|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase
|
Filed herewith
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase
|
Filed herewith
|
RIDGEWOOD ENERGY W FUND, LLC
|
||||||
Dated:
|
November 9, 2017
|
By:
|
/s/
|
ROBERT E. SWANSON
|
||
Name:
|
Robert E. Swanson
|
|||||
Title:
|
Chief Executive Officer
|
|||||
(Principal Executive Officer)
|
||||||
Dated:
|
November 9, 2017
|
By:
|
/s/
|
KATHLEEN P. MCSHERRY
|
||
Name:
|
Kathleen P. McSherry
|
|||||
Title:
|
Executive Vice President and Chief Financial Officer
|
|||||
(Principal Financial and Accounting Officer)
|
A. |
The Borrowers, the Administrative Agent, and the Lenders have entered into that certain Credit Agreement, dated as of November 27, 2012, as amended by that certain First Amendment to Credit Agreement, dated as of September 30, 2016 (as may be further amended, supplemented, or otherwise modified prior to the Second Amendment Effective Date, the “Credit Agreement”).
|
B. |
Pursuant to the Credit Agreement, the Lenders have made loans to the Borrowers.
|
C. |
The Administrative Agent and Borrowers previously agreed to a waiver via email (the “Previous Waiver”) regarding the monthly payment due for the Monthly Payment Date occurring on August 31, 2017 (the “Waived Event”).
|
D. |
The Borrowers have requested that the Lenders enter into this Amendment and Reaffirmation to (a) formalize and document the Previous Waiver and (b) make certain amendments to the Credit Agreement.
|
E. |
Subject to the terms and conditions set forth herein, the parties hereto have agreed to enter into this Amendment and Reaffirmation.
|
F. |
NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrowers, Administrative Agent, and the Lenders party hereto hereby agree as follows:
|
Borrower
|
Borrower’s
Pro -Rata
Share
|
Maximum Permitted
Net Revenues Diversion Costs |
O
|
25.4%
|
4,840,732
|
Q
|
5.7%
|
1,086,306
|
S
|
13.5%
|
2,572,830
|
T
|
9.3%
|
1,772,394
|
V
|
14.3%
|
2,725,294
|
W
|
9.9%
|
1,886,742
|
A-1
|
8.7%
|
1,658,046
|
B-1
|
13.2%
|
2,515,656
|
Total
|
1.00
|
19,058,000
|
BORROWERS:
|
RIDGEWOOD ENERGY O FUND, LLC
|
|
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY Q FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY S FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY T FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY V FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY W FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY A-1 FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
RIDGEWOOD ENERGY B-1 FUND, LLC
|
||
By:
|
/S/ DANIEL V. GULINO
|
|
Daniel V. Gulino
|
||
Senior Vice President – Legal
|
ADMINISTRATIVE AGENT:
|
RAHR ENERGY INVESTMENTS, LLC,
as Administrative Agent
|
|
By:
|
/S/ LAWRENCE J. FOSSI
|
|
Lawrence J. Fossi
|
||
Manager
|
LENDER:
|
RAHR ENERGY INVESTMENTS, LLC,
as a Lender
|
|
By:
|
/S/ LAWRENCE J. FOSSI
|
|
Lawrence J. Fossi
|
||
Manager
|
Schedule 1.01(h)
|
||||||||||||||||||||||||||||||||||||||||||
Permitted Net Revenues Diversion Costs for Beta A-7, AFE D1604-Slot G, and AFE E1706-Slot C
|
||||||||||||||||||||||||||||||||||||||||||
Working
|
8/8ths
|
Ridgewoods
Interest |
Notes
|
O Fund
|
Q Fund
|
S Fund
|
T Fund
|
V Fund
|
W Fund
|
A-1 Fund
|
B-1 Fund
|
|||||||||||||||||||||||||||||||
Interest
|
32.50% |
|
|
5% | 2.25% |
|
2.50% | 2% | 3% | 3% | 2% | 3% | ||||||||||||||||||||||||||||||
Beta A-7 Project (5th well)
|
|
|||||||||||||||||||||||||||||||||||||||||
Lease Costs
|
1,272,679.00
|
413,620.68
|
purchase of Javelin Lease
|
63,633.95
|
28,635.28
|
31,816.98
|
25,453.58
|
38,180.37
|
38,180.37
|
25,453.58
|
38,180.37
|
|||||||||||||||||||||||||||||||
Paid
|
Jun-16
|
(413,620.67
|
)
|
(63,633.95
|
)
|
(28,635.28
|
)
|
(31,816.97
|
)
|
(25,453.58
|
)
|
(38,180.37
|
)
|
(38,180.37
|
)
|
(25,453.58
|
)
|
(38,180.37
|
)
|
|||||||||||||||||||||||
Paid in Full
|
0.01
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
Drill Pipe A-7
|
1,879,120.00
|
610,714.00
|
Drive Pipe/
Suspension Sys |
93,956.00
|
42,280.20
|
46,978.00
|
37,582.40
|
56,373.60
|
56,373.60
|
37,582.40
|
56,373.60
|
|||||||||||||||||||||||||||||||
Paid thru
|
Jul-17
|
(524,869.00
|
)
|
(80,749.08
|
)
|
(36,337.08
|
)
|
(40,374.54
|
)
|
(32,299.63
|
)
|
(48,449.45
|
)
|
(48,449.45
|
)
|
(32,299.63
|
)
|
(48,449.45
|
)
|
|||||||||||||||||||||||
Accrued
|
Aug-17
|
(28,972.69
|
)
|
27 of the 80 days
|
(4,457.34
|
)
|
(2,005.80
|
)
|
(2,228.67
|
)
|
(1,782.93
|
)
|
(2,674.40
|
)
|
(2,674.40
|
)
|
(1,782.93
|
)
|
(2,674.40
|
)
|
||||||||||||||||||||||
Accrued
|
Sep-17
|
(32,191.88
|
)
|
30 of the 80 days
|
(4,952.60
|
)
|
(2,228.67
|
)
|
(2,476.30
|
)
|
(1,981.04
|
)
|
(2,971.56
|
)
|
(2,971.56
|
)
|
(1,981.04
|
)
|
(2,971.56
|
)
|
||||||||||||||||||||||
Accrued
|
Oct-17
|
(24,680.44
|
)
|
23 of the 80 days
|
(3,796.99
|
)
|
(1,708.65
|
)
|
(1,898.50
|
)
|
(1,518.80
|
)
|
(2,278.19
|
)
|
(2,278.19
|
)
|
(1,518.80
|
)
|
(2,278.19
|
)
|
||||||||||||||||||||||
Outstanding Balance
|
-
|
-
|
0.00
|
-
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
|||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
Drilling Well A-7
|
32,320,600.00
|
10,504,195.00
|
80 day
operation per AFE |
1,616,030.00
|
727,213.50
|
808,015.00
|
646,412.00
|
969,618.00
|
969,618.00
|
646,412.00
|
969,618.00
|
|||||||||||||||||||||||||||||||
Paid thru
|
Jul-17
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||||||
Accrued
|
Aug-17
|
(3,545,165.81
|
)
|
27 of the 80 days
|
(545,410.13
|
)
|
(245,434.56
|
)
|
(272,705.06
|
)
|
(218,164.05
|
)
|
(327,246.08
|
)
|
(327,246.08
|
)
|
(218,164.05
|
)
|
(327,246.08
|
)
|
||||||||||||||||||||||
Accrued
|
Sep-17
|
(3,939,073.13
|
)
|
30 of the 80 days
|
(606,011.25
|
)
|
(272,705.06
|
)
|
(303,005.63
|
)
|
(242,404.50
|
)
|
(363,606.75
|
)
|
(363,606.75
|
)
|
(242,404.50
|
)
|
(363,606.75
|
)
|
||||||||||||||||||||||
Accrued
|
Oct-17
|
(3,019,956.06
|
)
|
23 of the 80 days
|
(464,608.63
|
)
|
(209,073.88
|
)
|
(232,304.31
|
)
|
(185,843.45
|
)
|
(278,765.18
|
)
|
(278,765.18
|
)
|
(185,843.45
|
)
|
(278,765.18
|
)
|
||||||||||||||||||||||
Outstanding Balance
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
Completion A-7
|
23,500,000.00
|
7,637,500.00
|
55 day operation (est)
|
1,175,000.00
|
528,750.00
|
587,500.00
|
470,000.00
|
705,000.00
|
705,000.00
|
470,000.00
|
705,000.00
|
|||||||||||||||||||||||||||||||
Accrued
|
Nov-17
|
(1,110,909.09
|
)
|
8 of the 55 days
|
(170,909.09
|
)
|
(76,909.09
|
)
|
(85,454.55
|
)
|
(68,363.64
|
)
|
(102,545.45
|
)
|
(102,545.45
|
)
|
(68,363.64
|
)
|
(102,545.45
|
)
|
||||||||||||||||||||||
Accrued
|
Dec-17
|
(4,304,772.73
|
)
|
31 of the 55 days
|
(662,272.73
|
)
|
(298,022.73
|
)
|
(331,136.36
|
)
|
(264,909.09
|
)
|
(397,363.64
|
)
|
(397,363.64
|
)
|
(264,909.09
|
)
|
(397,363.64
|
)
|
||||||||||||||||||||||
Accrued
|
Jan-17
|
(2,221,818.18
|
)
|
16 of the 55 days
|
(341,818.18
|
)
|
(153,818.18
|
)
|
(170,909.09
|
)
|
(136,727.27
|
)
|
(205,090.91
|
)
|
(205,090.91
|
)
|
(136,727.27
|
)
|
(205,090.91
|
)
|
||||||||||||||||||||||
Outstanding Balance
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
|
|
||||||||||||||||||||||||||||||||||||||||
Other Developmental AFE's received per Walter's APOD (not associated with the A-7 well)
|
||||||||||||||||||||||||||||||||||||||||||
AFE D1604-Slot G (potential A-5 well location)-supplement dated 8/18/17
|
||||||||||||||||||||||||||||||||||||||||||
Pipe
|
1,100,000.00
|
357,500.00
|
55,000.00
|
24,750.00
|
27,500.00
|
22,000.00
|
33,000.00
|
33,000.00
|
22,000.00
|
33,000.00
|
||||||||||||||||||||||||||||||||
Drive Pipe into Slot
|
559,450.00
|
181,821.25
|
27,972.50
|
12,587.63
|
13,986.25
|
11,189.00
|
16,783.50
|
16,783.50
|
11,189.00
|
16,783.50
|
||||||||||||||||||||||||||||||||
|
539,321.25
|
82,972.50
|
37,337.63
|
41,486.25
|
33,189.00
|
49,783.50
|
49,783.50
|
33,189.00
|
49,783.50
|
|||||||||||||||||||||||||||||||||
Paid in 2016
|
(834.74
|
)
|
(128.42
|
)
|
(57.79
|
)
|
(64.21
|
)
|
(51.37
|
)
|
(77.05
|
)
|
(77.05
|
)
|
(51.37
|
)
|
(77.05
|
)
|
||||||||||||||||||||||||
Paid July 2017
|
(686.73
|
)
|
(105.65
|
)
|
(47.54
|
)
|
(52.83
|
)
|
(42.26
|
)
|
(63.39
|
)
|
(63.39
|
)
|
(42.26
|
)
|
(63.39
|
)
|
||||||||||||||||||||||||
Accrued
|
Aug-17
|
(77,682.08
|
)
|
13 of the 90 days
|
(11,951.09
|
)
|
(5,377.99
|
)
|
(5,975.54
|
)
|
(4,780.44
|
)
|
(7,170.65
|
)
|
(7,170.65
|
)
|
(4,780.44
|
)
|
(7,170.65
|
)
|
||||||||||||||||||||||
Accrued
|
Sep-17
|
(179,266.33
|
)
|
30 of the 90 days
|
(27,579.44
|
)
|
(12,410.75
|
)
|
(13,789.72
|
)
|
(11,031.77
|
)
|
(16,547.66
|
)
|
(16,547.66
|
)
|
(11,031.77
|
)
|
(16,547.66
|
)
|
||||||||||||||||||||||
Accrued
|
Oct-17
|
(185,241.88
|
)
|
31 of the 90 days
|
(28,498.75
|
)
|
(12,824.44
|
)
|
(14,249.38
|
)
|
(11,399.50
|
)
|
(17,099.25
|
)
|
(17,099.25
|
)
|
(11,399.50
|
)
|
(17,099.25
|
)
|
||||||||||||||||||||||
Accrued
|
Nov-17
|
(95,609.49
|
)
|
16 of the 90 days
|
(14,709.15
|
)
|
(6,619.12
|
)
|
(7,354.58
|
)
|
(5,883.66
|
)
|
(8,825.49
|
)
|
(8,825.49
|
)
|
(5,883.66
|
)
|
(8,825.49
|
)
|
||||||||||||||||||||||
Outstanding Balance
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||||
AFE E1706-Slot C (well location TBD)-dated 8/18/17
|
||||||||||||||||||||||||||||||||||||||||||
Pipe
|
1,100,000.00
|
357,500.00
|
55,000.00
|
24,750.00
|
27,500.00
|
22,000.00
|
33,000.00
|
33,000.00
|
22,000.00
|
33,000.00
|
||||||||||||||||||||||||||||||||
Drive Pipe into Slot
|
559,450.00
|
181,821.25
|
27,972.50
|
12,587.63
|
13,986.25
|
11,189.00
|
16,783.50
|
16,783.50
|
11,189.00
|
16,783.50
|
||||||||||||||||||||||||||||||||
|
539,321.25
|
82,972.50
|
37,337.63
|
41,486.25
|
33,189.00
|
49,783.50
|
49,783.50
|
33,189.00
|
49,783.50
|
|||||||||||||||||||||||||||||||||
Accrued
|
Aug-17
|
(77,901.96
|
)
|
13 of the 90 days
|
(11,984.92
|
)
|
(5,393.21
|
)
|
(5,992.46
|
)
|
(4,793.97
|
)
|
(7,190.95
|
)
|
(7,190.95
|
)
|
(4,793.97
|
)
|
(7,190.95
|
)
|
||||||||||||||||||||||
Accrued
|
Sep-17
|
(179,773.75
|
)
|
30 of the 90 days
|
(27,657.50
|
)
|
(12,445.88
|
)
|
(13,828.75
|
)
|
(11,063.00
|
)
|
(16,594.50
|
)
|
(16,594.50
|
)
|
(11,063.00
|
)
|
(16,594.50
|
)
|
||||||||||||||||||||||
Accrued
|
Oct-17
|
(185,766.21
|
)
|
31 of the 90 days
|
(28,579.42
|
)
|
(12,860.74
|
)
|
(14,289.71
|
)
|
(11,431.77
|
)
|
(17,147.65
|
)
|
(17,147.65
|
)
|
(11,431.77
|
)
|
(17,147.65
|
)
|
||||||||||||||||||||||
Accrued
|
Nov-17
|
(95,879.33
|
)
|
16 of the 90 days
|
(14,750.67
|
)
|
(6,637.80
|
)
|
(7,375.33
|
)
|
(5,900.27
|
)
|
(8,850.40
|
)
|
(8,850.40
|
)
|
(5,900.27
|
)
|
(8,850.40
|
)
|
||||||||||||||||||||||
Outstanding Balance
|
-
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Dated:
|
November 9, 2017
|
|||
/s/
|
ROBERT E. SWANSON
|
|||
Name:
|
Robert E. Swanson
|
|||
Title:
|
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
Dated:
|
November 9, 2017
|
|||
/s/
|
KATHLEEN P. MCSHERRY
|
|||
Name:
|
Kathleen P. McSherry
|
|||
Title:
|
Executive Vice President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Fund.
|
Dated:
|
November 9, 2017
|
|||
/s/
|
ROBERT E. SWANSON
|
|||
Name:
|
Robert E. Swanson
|
|||
Title:
|
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
||||
Dated:
|
November 9, 2017
|
|||
/s/
|
KATHLEEN P. MCSHERRY
|
|||
Name:
|
Kathleen P. McSherry
|
|||
Title:
|
Executive Vice President and Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2017 |
Nov. 09, 2017 |
|
Document And Entity Information Abstract | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 | |
Entity Registrant Name | Ridgewood Energy W Fund LLC | |
Entity Central Index Key | 0001409947 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 332.2918 |
UNAUDITED CONDENSED BALANCE SHEETS (Parenthetical) - shares |
Sep. 30, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Shares authorized | 625 | 625 |
Shares issued | 332.2918 | 332.2918 |
Shares outstanding | 332.2918 | 332.2918 |
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Revenue | ||||
Oil and gas revenue | $ 1,361 | $ 851 | $ 5,262 | $ 1,406 |
Expenses | ||||
Depletion and amortization | 601 | 403 | 4,186 | 586 |
Management fees to affiliate (Note 2) | 225 | 240 | 675 | 720 |
Operating expenses | 336 | 267 | 1,071 | 482 |
General and administrative expenses | 42 | 38 | 135 | 110 |
Total expenses | 1,204 | 948 | 6,067 | 1,898 |
Income (loss) from operations | 157 | (97) | (805) | (492) |
Interest expense, net | (237) | (163) | (705) | (162) |
Net loss | (80) | (260) | (1,510) | (654) |
Manager Interest | ||||
Net income | 110 | 41 | 473 | 9 |
Shareholder Interest | ||||
Net loss | $ (190) | $ (301) | $ (1,983) | $ (663) |
Net loss per share | $ (574) | $ (906) | $ (5,967) | $ (1,994) |
Organization and Summary of Significant Accounting Policies |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 | |||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Organization and Summary of Significant Accounting Policies |
Organization
The Ridgewood Energy W Fund, LLC (the “Fund”), a Delaware limited liability company, was formed on May 17, 2007 and operates pursuant to a limited liability company agreement (the “LLC Agreement”) dated as of June 15, 2007 by and among Ridgewood Energy Corporation (the “Manager”) and the shareholders of the Fund, which addresses matters such as the authority and voting rights of the Manager and shareholders, capitalization, transferability of membership interests, participation in costs and revenues, distribution of assets and dissolution and winding up. The Fund was organized to primarily acquire interests in oil and gas properties located in the United States offshore waters of Texas, Louisiana and Alabama in the Gulf of Mexico.
The Manager has direct and exclusive control over the management of the Fund’s operations. The Manager performs, or arranges for the performance of, the management, advisory and administrative services required for Fund operations. Such services include, without limitation, the administration of shareholder accounts, shareholder relations, the preparation, review and dissemination of tax and other financial information and the management of the Fund’s investments in projects. In addition, the Manager provides office space, equipment and facilities and other services necessary for Fund operations. The Manager also engages and manages contractual relations with unaffiliated custodians, depositories, accountants, attorneys, corporate fiduciaries, insurers, banks and others as required. See Notes 2, 3 and 4.
Basis of Presentation
These unaudited interim condensed financial statements have been prepared by the Fund’s management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Fund’s financial position, results of operations and cash flows for the periods presented. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in these unaudited interim condensed financial statements. The results of operations, financial position, and cash flows for the periods presented herein are not necessarily indicative of future financial results. These unaudited interim condensed financial statements should be read in conjunction with the Fund’s December 31, 2016 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K (“2016 Annual Report”) filed with the Securities and Exchange Commission (“SEC”). The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2016, but does not include all annual disclosures required by GAAP.
Use of Estimates
The preparation of financial statements in accordance with GAAP 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 revenue and expense during the reporting period. On an ongoing basis, the Manager reviews its estimates, including those related to the fair value of financial instruments, depletion and amortization, determination of proved reserves, impairment of long-lived assets and asset retirement obligations. Actual results may differ from those estimates.
Summary of Significant Accounting Policies
The Fund has provided discussion of significant accounting policies in Note 1 of “Notes to Financial Statements” – “Organization and Summary of Significant Accounting Policies” contained in Item 8. “Financial Statements and Supplementary Data” within its 2016 Annual Report. There have been no significant changes to the Fund’s significant accounting policies during the three and nine months ended September 30, 2017.
Asset Retirement Obligations
For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired. Upon the determination that a property is either proved or dry, a retirement obligation is incurred. The Fund recognizes the fair value of a liability for an asset retirement obligation in the period incurred. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs. At least bi-annually, or more frequently if an event occurs that would dictate a change in assumptions or estimates underlying the obligations, the Fund reassesses its asset retirement obligations to determine whether any revisions to the obligations are necessary. The Fund maintains a salvage fund to provide for the funding of asset retirement obligations.
Impairment of Long-Lived Assets
The Fund reviews the carrying value of its oil and gas properties annually and when management determines that events and circumstances indicate that the recorded carrying value of properties may not be recoverable. Impairments are determined by comparing estimated future net undiscounted cash flows to the carrying value at the time of the review. If the carrying value exceeds the estimated future net undiscounted cash flows, the carrying value of the asset is written down to fair value, which is determined using estimated future net discounted cash flows from the asset. The fair value determinations require considerable judgment and are sensitive to change. Different pricing assumptions, reserve estimates or discount rates could result in a different calculated impairment. Given the volatility of oil and natural gas prices, it is reasonably possible that the Fund’s estimate of future net discounted cash flows from proved oil and natural gas reserves could change in the near term.
Fluctuations in oil and natural gas prices may impact the fair value of the Fund’s oil and gas properties. If oil and natural gas prices decline, even if only for a short period of time, it is possible that impairments of oil and gas properties will occur.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance on revenue recognition, which provides for a single five-step model to be applied to all revenue contracts with customers. In July 2015, the FASB issued a deferral of the effective date of the guidance to 2018, with early adoption permitted in 2017. In March 2016, the FASB issued accounting guidance, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued guidance on identifying performance obligations and licensing and in May 2016, the FASB issued final amendments which provided narrow scope improvements and practical expedients related to the implementation of the guidance. The accounting guidance may be applied either retrospectively or through the use of a modified-retrospective method. The Fund has substantially completed the evaluation of the accounting guidance and currently expects the adoption of the accounting guidance will not have a material impact on the Fund’s financial statements. Under the new accounting guidance, the revenue associated with the Fund’s existing contracts will be recognized in the period that control of the related commodity is transferred to the customer, which is generally consistent with its current revenue recognition model. The Fund will adopt the new accounting guidance using the modified retrospective method at the date of adoption, which is January 1, 2018. Although the Fund has not identified changes to its revenue recognition that would result in a material cumulative effect adjustment to retained earnings on January 1, 2018, the Fund expects the adoption of the accounting guidance will result in enhanced disclosures related to revenue recognition policies, the Fund’s performance obligations and significant judgments used in applying the new revenue recognition accounting guidance. |
Related Parties |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 | |||
Related Party Transactions [Abstract] | |||
Related Parties |
Pursuant to the terms of the LLC Agreement, the Manager is entitled to an annual management fee, payable monthly, of 2.5% of total capital contributions, net of cumulative dry-hole and related well costs incurred by the Fund. In addition, pursuant to the terms of the LLC Agreement, the Manager is also permitted to waive the management fee at its own discretion. Such fee may be temporarily waived to accommodate the Fund’s short-term capital commitments. Management fees during each of the three and nine months ended September 30, 2017 and 2016 were $0.2 million and $0.7 million, respectively.
The Manager is also entitled to receive a 15% interest in cash distributions from operations made by the Fund. The Fund did not pay distributions during the three and nine months ended September 30, 2017 and 2016.
In 2016, the Fund entered into a master agreement with Beta Sales and Transport, LLC, a wholly owned subsidiary of the Manager, to facilitate the transportation and sale of oil and natural gas produced from the Beta Project. The Fund has provided discussion of this agreement in Note 2 of “Notes to Financial Statements” – “Related Parties” contained in Item 8. “Financial Statements and Supplementary Data” within its 2016 Annual Report.
At times, short-term payables and receivables, which do not bear interest, arise from transactions with affiliates in the ordinary course of business.
The Fund has working interest ownership in certain projects to acquire and develop oil and natural gas projects, which are also owned by other entities that are likewise managed by the Manager. |
Credit Agreement - Beta Project Financing |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 | |||
Debt Disclosure [Abstract] | |||
Credit Agreement - Beta Project Financing |
As of September 30, 2017 and December 31, 2016, the Fund had borrowings of $9.0 million and $9.4 million, respectively, under the credit agreement. The loan bears interest at 8% compounded annually. Principal and interest are repaid at the lesser of the Monthly Fixed Amount or the Debt Service Cap amount, as defined in the credit agreement, until the loan is repaid in full, in no event later than December 31, 2020. The loan may be prepaid by the Fund without premium or penalty. As of December 31, 2016, in accordance with the terms of the credit agreement, there are no additional borrowings available to the Fund. On September 15, 2017, the Fund and other participating funds managed by the Manager, entered into the second amendment to the credit agreement (“Second Amendment”). The Second Amendment principally amended the definition of net revenues, which is the basis for the calculation of the Debt Service Cap amount.
Unamortized debt discounts and deferred financing costs of $35 thousand as of September 30, 2017 and $0.1 million as of December 31, 2016 are presented as a reduction of “Long-term borrowings” on the balance sheets. Amortization expense during the three and nine months ended September 30, 2017 of $35 thousand and $0.1 million, respectively, and amortization expense during the three months ended September 30, 2016 of $35 thousand were expensed and included on the statements of operations within “Interest expense, net”. Amortization expense during the nine months ended September 30, 2016 of $0.1 million was capitalized and included on the balance sheet within “Oil and gas properties”.
As of September 30, 2017, there were no accrued interest costs outstanding. As of December 31, 2016, accrued interest costs of $0.6 million were included on the balance sheets within “Accrued expenses”. Interest costs incurred during the three and nine months ended September 30, 2017 of $0.2 million and $0.6 million, respectively, and interest costs incurred during the three months ended September 30, 2016 of $0.1 million were expensed and included on the statements of operations within “Interest expense, net”. Interest costs incurred during the nine months ended September 30, 2016 of $0.2 million were capitalized and included on the balance sheet within “Oil and gas properties”. During the nine months ended September 30, 2017, the Fund made payments on the loan of $0.3 million, which related to capitalized interest costs.
As additional consideration to the lenders, the Fund has agreed to convey an overriding royalty interest (“ORRI”) in its working interest in the Beta Project to the lenders. Such ORRI will not accrue or become payable to the lenders until after the loan is repaid in full. The credit agreement contains customary covenants, with which the Fund was in compliance as of September 30, 2017 and December 31, 2016. |
Commitments and Contingencies |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2017 | |||
Commitments and Contingencies Disclosure [Abstract] | |||
Commitments and Contingencies |
Capital Commitments
As of September 30, 2017, the Fund’s estimated capital commitments related to its oil and gas properties were $6.4 million (which include asset retirement obligations for the Fund’s projects of $4.1 million), of which $1.8 million is expected to be spent during the next twelve months primarily related to the additional development costs for the Beta Project. As a result of continued development of the Beta Project, the Fund has experienced negative cash flows for the nine months ended September 30, 2017. Additionally, current liabilities exceed current assets as of September 30, 2017. Future results of operations and cash flows are dependent on the continued successful development and the related production of oil and gas revenues from the Beta Project.
Based upon its current cash position and its current reserve estimates, the Fund expects cash flow from operations to be sufficient to cover its commitments, borrowing repayments and ongoing operations. Reserve estimates are projections based on engineering data that cannot be measured with precision, require substantial judgment, and are subject to frequent revision. However, if cash flow from operations is not sufficient to meet the Fund’s commitments, the Manager will temporarily waive all or a portion of the management fee as well as provide short-term financing to accommodate the Fund’s short-term commitments if needed.
Environmental and Governmental Regulations
Many aspects of the oil and gas industry are subject to federal, state and local environmental laws and regulations. The Manager and operators of the Fund’s properties are continually taking action they believe appropriate to satisfy applicable federal, state and local environmental regulations. 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. As of September 30, 2017 and December 31, 2016, there were no known environmental contingencies that required adjustment to, or disclosure in, the Fund’s financial statements.
Oil and gas industry legislation and administrative regulations are periodically changed for a variety of political, economic, and other reasons. Any such future laws and regulations could result in increased compliance costs or additional operating restrictions, which could have a material adverse effect on the Fund’s operating results and cash flows. It is not possible at this time to predict whether such legislation or regulation, if proposed, will be adopted as initially written, if at all, or how legislation or new regulation that may be adopted would impact the Fund’s business.
BOEM Notice to Lessees on Supplemental Bonding
On July 14, 2016, the Bureau of Ocean Energy Management (“BOEM”) issued a Notice to Lessees (“NTL”) that discontinued and materially replaced existing policies and procedures regarding financial security (i.e. supplemental bonding) for decommissioning obligations of lessees of federal oil and gas leases and owners of pipeline rights-of-way, rights-of use and easements on the Outer Continental Shelf (“Lessees”). Generally, the new NTL (i) ended the practice of excusing Lessees from providing such additional security where co-lessees had sufficient financial strength to meet such decommissioning obligations, (ii) established new criteria for determining financial strength and additional security requirements of such Lessees, (iii) provided acceptable forms of such additional security and (iv) replaced the waiver system with one of self-insurance. The new rule became effective as of September 12, 2016; however on January 6, 2017, the BOEM announced that it was suspending the implementation timeline for six months in certain circumstances. On June 22, 2017, the BOEM announced that the implementation timeline extension will remain in effect pending the completion of its review of the new NTL. The Fund, as well as other industry participants, are working with the BOEM, its operators and working interest partners to determine and agree upon the correct level of decommissioning obligations to which they may be liable and the manner in which such obligations will be secured. The impact of the NTL, if enforced without change or amendment, may require the Fund to fully secure all of its potential abandonment liabilities to the BOEM’s satisfaction using one or more of the enumerated methods for doing so. Potentially this could increase costs to the Fund if the Fund is required to obtain additional supplemental bonding, fund escrow accounts or obtain letters of credit.
Insurance Coverage
The Fund is subject to all risks inherent in the oil and natural gas business. 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 that is not insured or not fully insured could have a material adverse impact upon earnings and financial position. Moreover, insurance is obtained as a package covering all of the funds managed by the Manager. Depending on the extent, nature and payment of claims made by the Fund or other funds managed by the Manager, yearly insurance coverage may be exhausted and become insufficient to cover a claim by the Fund in a given year. |
Organization and Summary of Significant Accounting Policies (Policy) |
9 Months Ended |
---|---|
Sep. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation
These unaudited interim condensed financial statements have been prepared by the Fund’s management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the Fund’s financial position, results of operations and cash flows for the periods presented. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in these unaudited interim condensed financial statements. The results of operations, financial position, and cash flows for the periods presented herein are not necessarily indicative of future financial results. These unaudited interim condensed financial statements should be read in conjunction with the Fund’s December 31, 2016 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K (“2016 Annual Report”) filed with the Securities and Exchange Commission (“SEC”). The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2016, but does not include all annual disclosures required by GAAP. |
Use of Estimates | Use of Estimates
The preparation of financial statements in accordance with GAAP 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 revenue and expense during the reporting period. On an ongoing basis, the Manager reviews its estimates, including those related to the fair value of financial instruments, depletion and amortization, determination of proved reserves, impairment of long-lived assets and asset retirement obligations. Actual results may differ from those estimates. |
Asset Retirement Obligations | Asset Retirement Obligations
For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired. Upon the determination that a property is either proved or dry, a retirement obligation is incurred. The Fund recognizes the fair value of a liability for an asset retirement obligation in the period incurred. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs. At least bi-annually, or more frequently if an event occurs that would dictate a change in assumptions or estimates underlying the obligations, the Fund reassesses its asset retirement obligations to determine whether any revisions to the obligations are necessary. The Fund maintains a salvage fund to provide for the funding of asset retirement obligations. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets
The Fund reviews the carrying value of its oil and gas properties annually and when management determines that events and circumstances indicate that the recorded carrying value of properties may not be recoverable. Impairments are determined by comparing estimated future net undiscounted cash flows to the carrying value at the time of the review. If the carrying value exceeds the estimated future net undiscounted cash flows, the carrying value of the asset is written down to fair value, which is determined using estimated future net discounted cash flows from the asset. The fair value determinations require considerable judgment and are sensitive to change. Different pricing assumptions, reserve estimates or discount rates could result in a different calculated impairment. Given the volatility of oil and natural gas prices, it is reasonably possible that the Fund’s estimate of future net discounted cash flows from proved oil and natural gas reserves could change in the near term.
Fluctuations in oil and natural gas prices may impact the fair value of the Fund’s oil and gas properties. If oil and natural gas prices decline, even if only for a short period of time, it is possible that impairments of oil and gas properties will occur. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued accounting guidance on revenue recognition, which provides for a single five-step model to be applied to all revenue contracts with customers. In July 2015, the FASB issued a deferral of the effective date of the guidance to 2018, with early adoption permitted in 2017. In March 2016, the FASB issued accounting guidance, which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued guidance on identifying performance obligations and licensing and in May 2016, the FASB issued final amendments which provided narrow scope improvements and practical expedients related to the implementation of the guidance. The accounting guidance may be applied either retrospectively or through the use of a modified-retrospective method. The Fund has substantially completed the evaluation of the accounting guidance and currently expects the adoption of the accounting guidance will not have a material impact on the Fund’s financial statements. Under the new accounting guidance, the revenue associated with the Fund’s existing contracts will be recognized in the period that control of the related commodity is transferred to the customer, which is generally consistent with its current revenue recognition model. The Fund will adopt the new accounting guidance using the modified retrospective method at the date of adoption, which is January 1, 2018. Although the Fund has not identified changes to its revenue recognition that would result in a material cumulative effect adjustment to retained earnings on January 1, 2018, the Fund expects the adoption of the accounting guidance will result in enhanced disclosures related to revenue recognition policies, the Fund’s performance obligations and significant judgments used in applying the new revenue recognition accounting guidance. |
Related Parties (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
|
Related Party Transactions [Abstract] | ||||
Annual management fee percentage rate | 2.50% | 2.50% | ||
Annual management fees paid to Fund Manager | $ 225 | $ 240 | $ 675 | $ 720 |
Percentage of total distributions allocated to Fund Manager | 15.00% | 15.00% |
Credit Agreement - Beta Project Financing (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2017 |
Sep. 30, 2016 |
Sep. 30, 2017 |
Sep. 30, 2016 |
Dec. 31, 2016 |
|
Debt Disclosure [Abstract] | |||||
Long-term borrowings | $ 9,000 | $ 9,000 | $ 9,400 | ||
Credit agreement, interest rate | 8.00% | 8.00% | |||
Credit agreement, maturity date | Dec. 31, 2020 | ||||
Unamortized debt discounts and deferred financing costs | $ 35 | $ 35 | 100 | ||
Amortization of financing costs | 35 | $ 35 | 100 | ||
Amortization capitalized | $ 100 | ||||
Accrued interest | $ 600 | ||||
Interest expense | $ 200 | $ 100 | 600 | ||
Capitalized interest | $ 200 | ||||
Interest paid | $ 300 |
Commitments and Contingencies (Details) $ in Thousands |
9 Months Ended |
---|---|
Sep. 30, 2017
USD ($)
| |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments for the drilling and development of investment properties | $ 6,400 |
Commitments for asset retirement obligations included in estimated capital commitments | 4,100 |
Commitments for the drilling and development of investment properties expected to be incurred in the next 12 months | $ 1,800 |
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