---

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended December 31, 2006

or

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from _____ to _____

Commission File No. 000-51266

|RIDGEWOOD   ENERGY P FUND, LLC                          
|--------------------------------------------------------
|(Exact name of   registrant as specified in its charter)

|Delaware                                                         |  | 86-1133315                            
|---------------------------------------------------------------- |  | --------------------------------------
|(State or other jurisdiction of   incorporation or organization) |  | (I.R.S. Employer   Identification No.)

|1314 King Street, Wilmington, Delaware 19801          
|------------------------------------------------------
|(Address of principal   executive offices) (Zip code) 
|                                                      
|(302)   888-7444                                      
|(Registrants telephone   number, including area code)

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

Shares of LLC Membership Interest

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.     Yes
oNo
x

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or 15(d) of the Act.     Yes
oNo
x

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.     Yes
xNo
o

Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained herein,
to the best of the registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K.
x

Indicated by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the
Act. (Check one):

Large accelerated filer
o

Accelerated filer
o
 
Non-accelerated filer
x

Indicated by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).     Yes
oNo
x

There is no market for the shares. The aggregate capital contributions made for
the Registrants voting shares held by non-affiliates of the Registrant at
March 30, 2007 was approximately $138.3 million and as of that date there are
933.06 shares outstanding.

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##### 

RIDGEWOOD ENERGY P FUND 2006 ANNUAL REPORT ON FORM 10-K TABLE OF
CONTENTS

|         |         |                                                                                                                   |  | PAGE
|-------- | ------- | ----------------------------------------------------------------------------------------------------------------- |  | ----
|         |         |                                                                                                                   |  |     
|PART I   |         |                                                                                                                   |  |     
|         | ITEM 1  | BUSINESS                                                                                                          |  | 3   
|         | ITEM 1A | RISK FACTORS                                                                                                      |  | 12  
|         | ITEM 1B | UNRESOLVED STAFF COMMENTS                                                                                         |  | 18  
|         | ITEM 2  | PROPERTIES                                                                                                        |  | 18  
|         | ITEM 3  | LEGAL PROCEEDINGS                                                                                                 |  | 18  
|         | ITEM 4  | SUBMISSION OF MATTERS TO A VOTE OF   SECURITY HOLDERS                                                             |  | 18  
|PART II  |         |                                                                                                                   |  |     
|         | ITEM 5  | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SECURITY
HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 18  
|         | ITEM 6  | SELECTED FINANCIAL DATA                                                                                           |  | 20  
|         | ITEM 7  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS                             |  | 21  
|         | ITEM 7A | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK                                                        |  | 28  
|         | ITEM 8  | FINANCIAL STATEMENTS AND   SUPPLEMENTARY DATA                                                                     |  | 28  
|         | ITEM 9  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE                              |  | 28  
|         | ITEM 9A | CONTROLS AND PROCEDURES                                                                                           |  | 29  
|         | ITEM 9B | OTHER INFORMATION                                                                                                 |  | 29  
|PART III |         |                                                                                                                   |  |     
|         | ITEM 10 | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE                                                            |  | 29  
|         | ITEM 11 | EXECUTIVE COMPENSATION                                                                                            |  | 31  
|         | ITEM 12 | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SECURITY HOLDER MATTERS                |  | 31  
|         | ITEM 13 | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE                                          |  | 32  
|         | ITEM 14 | PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                                            |  | 32  
|PART IV  |         |                                                                                                                   |  |     
|         | ITEM 15 | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                                                                        |  | 32  



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##### 

FORWARD-LOOKING STATEMENTS

Certain statements in this Annual Report on Form 10-K (Annual
Report) and the documents the Fund has incorporated by reference into this
Annual Report, 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, would,
will be, will continue, 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
included in this Annual Report.  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 are registered under Section 12(g) of the Exchange
Act.  The Fund must therefore comply with, among other things, the periodic
reporting requirements of Section 13(a) of the Act. As a result, the Fund
prepares and files 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 files 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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PART I

ITEM 1.  BUSINESS

Overview

Ridgewood Energy P Fund, LLC (the Fund), (an exploratory stage
enterprise) is a Delaware limited liability company and was formed on March 21,
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 May 16, 2005, selling whole
and fractional shares of membership interests 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
limited liability company agreement (LLC agreement) and applicable
federal and state securities. The offering was terminated on October 30, 2005.
The Fund raised approximately $138.3 million. After payment of approximately
$22.2 million in offering fees, commissions and investment fees, the Fund had
approximately $116.1 million for investments and operating expenses. As of March
2, 2007, the Fund had 1,507 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 a total of approximately $3.5
million, $1.9 million and $5.3 million for the year ended December 31, 2006, the
period March 21, 2005 (Inception) through December 31, 2005 and the period March
21, 2005 (Inception) through December 31, 2006, respectively.  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 dry-hole expenses incurred by the Fund.  For the P Fund, the
management fee will be reduced by $0.1 million per month, based upon dry-hole
expenses of $48.7 million from inception 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 (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.

-3-



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##### 

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 and subsequently written
off.

|Lease   Block             |  | Working   Interest |       | Operator |  | Off-shore   Location in   Gulf of   Mexico |  | Target   Depth   (Feet) |           | Total Spent   12/31/2006   (in thousands) | 
|------------------------- |  | ------------------ | ----- | -------- |  | ------------------------------------------ |  | ----------------------- | --------- | ----------------------------------------- | 
|                          |  |                    |       |          |  |                                            |  |                         |           |                                           | 
|Dry   Holes (a)           |  |                    |       |          |  |                                            |  |                         |           |                                           | 
|South Marsh Island 231    |  |                    | 30.0% |          |  | Stone Energy                               |  |                         | Louisiana |                                           | 
|West Cameron 265/266      |  |                    | 40.0% |          |  | Marathon                                   |  |                         | Louisiana |                                           | 
|West Cameron 109          |  |                    | 22.5% |          |  | Nexen Inc.                                 |  |                         | Louisiana |                                           | 
|Green Canyon 246          |  |                    | 8.3%  |          |  | Woodside                                   |  |                         | Louisiana |                                           | 
|South Timbalier 135/136   |  |                    | 10.0% |          |  | Chevron                                    |  |                         | Louisiana |                                           | 
|Proved, not yet producing |  |                    |       |          |  |                                            |  |                         |           |                                           | 
|West Cameron 593          |  |                    | 43.3% |          |  | Newfield                                   |  |                         | Louisiana |                                           | 

|   
|---
|(a)

-4-



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##### 

Projects

The Fund owns a 40% working interest (as defined in Item 1. under Working
Interest in Oil and Natural Gas Leases) ownership in  West Cameron
265/266 operated by Marathon Oil Co. (Marathon), a 30% working
interest in South Marsh Island 231 operated by Stone Energy Corporation
(Stone), a 22.5% working interest in West Cameron 109 operated by
Nexen, Inc. (Nexen), a 8.3% working interest in Green Canyon 246
operated by Woodside Energy LTD. (Woodside), a 10% interest in South
Timbalier 135/136 operated by Chevron Corporation (Chevron) and a
43.3% working interest in West Cameron 593 operated by Newfield Exploration
Company (Newfield). These projects, summarized in the table above,
are described more fully below.

West Cameron 265/266In 2005, the Fund acquired a 40% working
interest in the exploratory project West Cameron 265/266 from Marathon, the
Operator.  In consideration of this interest, the Fund agreed to pay 60% of
the drilling costs on the first well. The project is located in the center of
the two federal lease blocks and had a five to seven reservoir potential,
stacked one on top of the other between 11,000 feet and 19,000 feet. The well
began drilling in February 2006.  The well was deemed to be
non-commercial.  On May 16, 2006, the decision was made to plug and abandon
the well.  Dry-hole costs related to West Cameron 265/266, including plug
and abandonment expenses, incurred by the Fund for the year ended December 31,
2006, the period March 21, 2005 (Inception) through December 31, 2005, and for
the period March 21, 2005 (Inception) through December 31, 2006 were
approximately $21.5 million, $0.6 million and $22.0 million, respectively.

South Marsh Island 231In 2005, the Fund acquired a 30%
working interest in the exploratory project South Marsh Island 231 from Stone,
the Operator.  In consideration for this working interest, the Fund agreed
to pay 50% of the drilling costs for the first well. The target was two natural
gas reservoirs between 15,000 feet and 15,800 feet. The well began drilling on
February 18, 2006 and reached its total depth of 15,800 feet on March 31, 2006,
44 days after the first day of drilling.  Attempts to evaluate the well
with electric wireline logs failed. The well was evaluated with logging while
drilling (LWD) tools. The well was deemed to be non-commercial.  On April
5, 2006 the decision was made to plug and abandoned the well. Dry-hole costs
related to South Marsh Island 231, including plug and abandonment expenses,
incurred by the Fund for the year ended December 31, 2006, the period March 21,
2005 (Inception) through December 31, 2005, and for the period March 21, 2005
(Inception) through December 31, 2006 were approximately $8.4 million, nil and
$8.4 million, respectively.

West Cameron 109In August 2006, the fund acquired a 22.5%
working interest in the exploratory project West Cameron 109 from Nexen, the
operator. In consideration for this interest, the Fund agreed to pay 30% of the
drilling costs for the first well.   On December 1, 2006, the Fund was
informed by Nexen, that the exploratory well being drilled in West Cameron 109
lease block did not have commercially productive quantities of either oil or
natural gas and was therefore deemed an unsuccessful well or dry-hole.  In
addition, the well was plugged and abandoned.  Dry-hole costs related to
West Cameron 109, including plug and abandonment expenses, incurred by the Fund
for the year ended December 31, 2006, the period March 21, 2005 (Inception)
through December 31, 2005, and for the period March 21, 2005 (Inception) through
December 31, 2006 were approximately $8.2 million, nil and $8.2 million,
respectively.

Green Canyon 246In July 2006, the Fund acquired a 5% working
interest in the exploratory project Green Canyon 246 from Marathon, the operator
from acquisition date until December 28, 2006.   In consideration for
the interest from Marathon, the Fund agreed to pay 10% of the drilling costs on
the first well.  The project, located offshore Louisiana in 3,280 feet of
water, had multiple target reservoirs between 13,000 and 17,000 feet.  In
December 2006, oil was discovered in one reservoir of the well, however, a
side-track operation would need to be performed to determine the commercial
viability of the well.  Marathon elected not to participate in the
side-track and forfeited its 40% interest.  Woodside and the Fund elected
to proceed, taking over, on a pro-rated basis, Marathons 40% interest at
no additional cost to the Fund, which increased its ownership to 8.3%, or
Woodside, which took over the project as operator.   Upon completion
of the side-track, on January 24, 2007, the Fund was informed that the
exploratory well being drilled did not have commercially productive quantities
of either oil or natural gas and had therefore been deemed an unsuccessful well
or dry-hole.  The Fund owns an 8.3% working interest in Green Canyon
246.  Dry-hole costs related to Green Canyon 246, including plug and
abandonment expenses, incurred by the Fund for the year ended December 31, 2006,
the period March 21, 2005 (Inception) through December 31, 2005, and for the
period March 21, 2005 (Inception) through December 31, 2006 were approximately
$4.8 million, nil and $4.8 million, respectively.  The Fund incurred
additional dry-hole costs related to Green Canyon 246 of $1.4 million during
2007.

South Timbalier 135/136In 2006, the Fund acquired a 10%
working interest in the exploratory project South Timbalier 135/136 from
Chevron, the operator. In consideration for this interest, the Fund agreed to
pay 10% of the drilling costs on the first well.  The project, located
offshore Louisiana in 3,280 feet of water, had multiple target reservoirs
between 13,000 and 17,000 feet.  On January 24, 2007, the Fund was informed
by Chevron, that the exploratory well being drilled did not have commercially
productive quantities of either oil or natural gas and has therefore been deemed
an unsuccessful well or dry-hole.  Dry-hole costs related to South
Timbalier, including plug and abandonment expenses, incurred by the Fund for the
year ended December 31, 2006, the period March 21, 2005 (Inception) through
December 31, 2005, and for the period March 21, 2005 (Inception) through
December 31, 2006 were approximately $5.2 million,


nil and $5.2 million, respectively.  The Fund incurred additional dry-hole
costs related to South Timbalier 135/136 of $1.6 million during 2007.

-5-



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West Cameron 593In July 2006, the Fund acquired a 43.28%
working interest in the exploratory project West Cameron 593 from Newfield
Exploration, the operator.

On August 15, 2006, the Fund started drilling West Cameron 593 a 12,849 foot
single well project in approximately 257 feet of water offshore Louisiana. 
West Cameron 593 was deemed successful in mid-September and the well was
completed in October. A flow test was performed in October indicating strong
flow rates.  Newfield has an existing production platform approximately
10,000 feet away, also on lease block 593, that will produce and sell the
Funds proportionate share of gas after a flow-line is built to connect the
production platforms.     Newfield estimates the tie-in to
be complete in mid-spring 2007, at which point the well will be put in
production.  The Fund has made capital expenditures of $10.7 million
towards an estimated budget of $13.5 million.

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,
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), adjusted annually for
inflation. 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.

-6-



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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 Marathon, Stone, Nexen, Chevron, Woodside and Newfield.

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.

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. These projects are owned by affiliates
of the Fund.  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, that 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 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. The Fund
has deposited approximately $1 million from capital contributions into a salvage
fund which the Fund estimates to be sufficient to meet its 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.

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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 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.

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 lease 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.

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Offices

The Managers principal executive 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.

Regulation

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.

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.

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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.

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.

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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.

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.

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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.

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                   

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| |  | 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.

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 five dry holes.  Cumulative dry-hole costs to the Fund for
the year ended December 31, 2006, the period ended December, 31, 2005 and the
period March 21, 2005 (Inception) through December 31, 2006 totaled
approximately $48.1 million, $0.6 million and $48.7 million,
respectively.   With respect to these dry-holes, the Fund does not
anticipate incurring any significant future costs as all the wells have been
plugged and abandoned.  However, 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 the 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.

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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.

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.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, principles
generally accepted in the United States (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.

-14-



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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 its 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.In the Funds Form 10-A for the year ended December
31, 2005, filed November 13, 2006, the Fund reported material weaknesses with
respect to its lack of technical accounting resources on staff and the need for
additional training, formalized policies and procedures on documenting financial
controls.  These control deficiencies resulted in the restatement of the
Funds Form 10.  As a result of these material weaknesses, the Fund
concluded in its Form 10-A that its control over financial reporting was not
effective as of the end of the periods covered by the reports.  The Fund
has remediated these material weaknesses.  Investors, however, should be
aware that the Fund cannot guarantee that future material weaknesses will not
develop or be identified.  Any new


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.

-15-



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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 indefinitely.The Funds shares are illiquid investments. There is currently no
market for these shares and one is not likely to develop. 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
Funds 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 and the terms and conditions under which
such project would 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 and for negotiating and
completing the sale transaction.

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 its 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 also receives 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 period March 21, 2005 (Inception) through December 31,
2005, and the period March 21, 2005 (Inception) through December 31, 2006, the
management fee was $3.5 million, $1.9 million and $5.3 million,
respectively.  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 dry-hole expenses incurred by the Fund.  For
the Fund, the management fee will be reduced


by $0.1 million per month, based upon dry-hole expenses of $48.7 million from
inception through December 31, 2006.

In addition to its annual management fee, the Manager, as compensation for its
management services, 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.

-16-



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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.

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.

-17-



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##### 

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 1B.  UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2.  PROPERTIES

The information regarding the Funds properties that is contained in Item
1. Business of this Annual Report on Form 10-K is incorporated herein by
reference.

ITEM 3.  LEGAL PROCEEDINGS

On August 16, 2006, the Manager of the Fund filed a lawsuit against the former
independent registered public accounting firm for the Fund, Perelson Weiner
(PW), in New Jersey Superior Court, captioned Ridgewood Energy
Corporation v. Perelson Weiner, LLP, Docket No. L-6092-06.  The suit
alleged professional malpractice and breach of contract in connection with audit
and accounting services performed for the Fund by PW. Thereafter, PW filed a
counterclaim against the Manager on October 20, 2006, alleging breach of
contract due to unpaid invoices in the amount of $326,554. Discovery is ongoing
and no trial date has been set.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II.

ITEM 5.  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED SECURITY
HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Price of Common Units, Distributions and Related Shareholder
MattersThere 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 of 1933, as amended (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 Securities Act.  As of March 2, 2007, no
shares of the Fund could be sold pursuant to Rule 144.  The Fund has not
agreed to register any shares under the Securities Act for sale by security
holders.

As of March 2, 2007, there were approximately 1,507 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 LLC
Agreement.

-18-



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##### 

Participation in Costs and Revenues

The Funds investment objective is primarily to generate current cash flow
for distribution to shareholders 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:

| |  | determine what cash flow will be available for distributions to
Investors,
| | - | --------------------------------------------------------------------------
| |  | distribute available cash flow,                                           
| |  | give the Manager a share of cash flow, if available,                      
| |  | handle returns of capital contributions,                                  
| |  | allocate income and deductions for tax purposes, and                      
| |  | maintain capital accounts for Investors.                                  

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 as follows:

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 short-term investments (i.e.
U.S. Treasury Bills, certificates of deposits) and other interest bearing cash
accounts.

Available Cash
from Operations is all other available cash.

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 Manager
believes is advisable. Once the amount and timing of a distribution is
determined, it shall be made to shareholders 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,
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 Capital Transactions

Available Cash from Capital Transactions that the Fund decides to distribute
will be paid as follows:

| |  | Before shareholders have received total distributions equal to their capital
contributions, 99% of Available Cash from Capital Transactions will be
distributed to shareholders and 1% to the Manager.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | After shareholders have received total distributions 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

Distributions to shareholders under the foregoing provisions will be apportioned
among them in proportion to their ownership of their 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
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.  Any such return of capital will decrease
the shareholders capital contributions.

-19-



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##### 

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.

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.

During the period from March 21, 2005 until December 31, 2005, the Fund issued
an aggregate 933.06 shares for gross proceeds of approximately $138.3
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 $15.9 million was disbursed for
commissions and legal syndication fees. Additionally, approximately $6.3 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 6.  SELECTED FINANCIAL DATA

The following table summarizes certain selected financial data at December 31,
2006 and 2005, and for the year ended December 31, 2006, the period March 21,
2005 (Inception) through December 31, 2005 and the period March 21, 2005
(Inception) through December 31, 2006, and is derived from the audited financial
statements included herein.  Although the date of formation of the Fund is
March 21, 2005, the Fund did not begin business activities until May 16, 2005
when it began its private offering of shares.  There were no business
activities prior to May 16, 2005. 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.

|(in thousands, except per share data)                 |  | Year ended   December 31,   2006 |         | For the period March 21, 2005 (Inception) through December
31, 2005 |   | For the period March 21, 2005 (Inception) through December
31, 2006 |  
|----------------------------------------------------- |  | -------------------------------- | ------- | ------------------------------------------------------------------- | - | ------------------------------------------------------------------- | -
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Income Statement Data:                                |  |                                  |         |                                                                     |   |                                                                     |  
|Oil   and gas revenues                                |  | $                                |        |                                                                     | $ |                                                                    |  
|Total   expenses                                      |  |                                  | 52,394  |                                                                     |   | 8,841                                                               |  
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Loss   from operations                                |  |                                  | (52,394 | )                                                                   |   | (8,841                                                              | )
|Interest   income                                     |  |                                  | 4,566   |                                                                     |   | 1,564                                                               |  
|Realized loss on   marketable securities              |  |                                  | (18     | )                                                                   |   |                                                                    |  
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Net loss                                              |  | $                                | (47,846 | )                                                                   | $ | (7,277                                                              | )
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Earnings per share:                                   |  |                                  |         |                                                                     |   |                                                                     |  
|Net loss per share                                    |  | $                                | (50,149 | )                                                                   | $ | (7,493                                                              | )
|Cash Flow Data                                        |  |                                  |         |                                                                     |   |                                                                     |  
|Net cash used in operating   activities               |  | $                                | (3,081  | )                                                                   | $ | (7,122                                                              | )
|Net cash provided by (used   in) investing activities |  | $                                | 21,217  |                                                                     | $ | (109,793                                                            | )
|Net cash (used in) provided   by financing activities |  | $                                | (2      | )                                                                   | $ | 122,448                                                             |  
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|                                                      |  | December 31,                     |         |                                                                     |   |                                                                    
|                                                      |  |                                  |         |                                                                     |   |                                                                    
|                                                      |  | 2006                             |         | 2005                                                                |   |                                                                     |  
|                                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Balance   Sheet Data:                                 |  |                                  |         |                                                                     |   |                                                                     |  
|Cash and cash equivalents                             |  | $                                | 23,667  |                                                                     | $ | 5,533                                                               |  
|Short-term   investment in marketable securities      |  | $                                | 45,490  |                                                                     | $ | 83,770                                                              |  
|Salvage   fund                                        |  | $                                | 1,060   |                                                                     | $ | 1,014                                                               |  
|Oil   and gas properties                              |  | $                                | 10,679  |                                                                     | $ | 24,942                                                              |  
|Total   assets                                        |  | $                                | 81,534  |                                                                     | $ | 115,338                                                             |  
|Total   current liabilities                           |  | $                                | 14,114  |                                                                     | $ | 118                                                                 |  
|Total   members capital                              |  | $                                | 67,323  |                                                                     | $ | 115,220                                                             |  

-20-



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##### 

ITEM 7.  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 its 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 May 16, 2005. As
a result of such offering, the Fund raised approximately $138.3 million through
the sale of 933.0600 shares of LLC membership interests. After the payment of
approximately $22.2 million in offering fees, commissions and investment fees to
Ridgewood Energy Corporation, affiliates and broker-dealers, the Fund retained
approximately $116.1 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 affecting transactions when the capital contributions are made.  Since
inception in March 2005, the Fund has acquired an interest in six offshore
projects and has participated in the drilling of five wells.  During 2006
the Fund was notified by the project operators that three of the five projects
resulted in dry-holes.  In January 2007, the Fund was notified by the
project operators that two other projects resulted in dry-holes.  See
Subsequent Events below. West Cameron 593 was determined to be a
successful property in September 2006 and the Fund anticipates putting this well
on production during spring 2007.   See also Items 1. and 2.
Business and Properties.

The Manager performs certain duties on the Funds behalf including the
evaluation of potential projects for investment and on-going 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 one
time investment fee (4.5%) 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 distributions as additional compensation for
its administrative and management services.  See also Item 1.
Business.

The following review of operations for the year ended December 31, 2006, the
period March 21, 2005 (Inception) through December 31, 2005 and the period March
21, 2005 (Inception) through December 31, 2006 should be read in conjunction
with the Funds financial statements and the notes thereto.

Subsequent Events

Management FeeEffective 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 dry-hole expenses incurred by the
Fund.  For the Fund, the management fee will be reduced by $0.1 million per
month, based upon dry-hole expenses of $48.7 million from inception to
date.

Green Canyon 246On January 24, 2007, the Fund was informed by
its operator, Woodside, that the exploratory well being drilled by Woodside in
the Green Canyon 246 lease block did not have commercially productive quantities
of either oil or natural gas and had therefore been deemed an unsuccessful well
or dry-hole.  The Fund owns an 8.3% working interest in Green Canyon
246.  Dry-hole costs related to Green Canyon 246, including plug and
abandonment expenses, incurred by the Fund for the year ended December 31, 2006,
the period March 21, 2005 (Inception) through December 31, 2005, and for the
period March 21, 2005 (Inception) through December 31, 2006 were approximately
$4.8 million, nil and $4.8 million, respectively.  The Fund incurred
additional dry-hole costs related to Green Canyon 246 of $1.4 million during
2007.

South Timbalier 135/136On January 24, 2007, the Fund was
informed by its operator, Chevron, that the exploratory well being drilled by
Chevron in the South Timbalier 135/136 lease block did not have commercially
productive quantities of either oil or natural gas and has therefore been deemed
an unsuccessful well or dry-hole.  The Fund owns a 10% working interest in
South Timbalier 135/136.  Dry-hole costs related to South Timbalier,
including plug and abandonment expenses, incurred by the Fund for the year ended
December 31, 2006, the period March 21, 2005 (Inception) through December 31,
2005, and for the period March 21, 2005 (Inception) through December 31, 2006
were approximately $5.2 million, nil and $5.2 million, respectively.  The
Fund incurred additional dry-hole costs related to South Timbalier 135/136 of
$1.6 million during 2007.

-21-



---



##### 

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 8. contained in this
Form 10-K for a discussion of the Funds significant accounting
policies.

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 ReservesThe 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 years ended December 31, 2006 and 2005, 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 PropertiesUnproved 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 unevaluated 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 unevaluated property balance will be evaluated in
the next two years.

Asset Retirement ObligationsFor 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.

-22-



---



##### 

Impairment of Long-Lived AssetsThe 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.

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.

-23-



---



##### 

Results of OperationsThe following review of operations for the year
ended December 31, 2006, the period March 21, 2005 (Inception) through December
31, 2005, and the period March 21, 2005 (Inception) through 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 |         | For the period March 21, 2005 (Inception) through December
31, 2005 |   | For the period March 21, 2005 (Inception) through December
31, 2006 |  
|------------------------------------------------- |  | -------------------------------- | ------- | ------------------------------------------------------------------- | - | ------------------------------------------------------------------- | -
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Revenue                                           |  |                                  |         |                                                                     |   |                                                                     |  
|Oil and gas revenues                              |  | $                                |        |                                                                     | $ |                                                                    |  
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Expenses                                          |  |                                  |         |                                                                     |   |                                                                     |  
|Dry-hole costs                                    |  |                                  | 48,118  |                                                                     |   | 581                                                                 |  
|Investment fees to   affiliate                    |  |                                  |        |                                                                     |   | 6,281                                                               |  
|Management fees to   affiliate                    |  |                                  | 3,459   |                                                                     |   | 1,851                                                               |  
|General and   administrative expenses             |  |                                  | 817     |                                                                     |   | 128                                                                 |  
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Total expenses                                    |  |                                  | 52,394  |                                                                     |   | 8,841                                                               |  
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Loss from operations                              |  |                                  | (52,394 | )                                                                   |   | (8,841                                                              | )
|Other income                                      |  |                                  |         |                                                                     |   |                                                                     |  
|Interest income                                   |  |                                  | 4,566   |                                                                     |   | 1,564                                                               |  
|Realized loss on   marketable securities          |  |                                  | (18     | )                                                                   |   |                                                                    |  
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Net loss                                          |  |                                  | (47,846 | )                                                                   |   | (7,277                                                              | )
|Other comprehensive (loss) gain                   |  |                                  |         |                                                                     |   |                                                                     |  
|Unrealized (loss) gain   on marketable securities |  |                                  | (51     | )                                                                   |   | 51                                                                  |  
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Total comprehensive   loss                        |  | $                                | (47,897 | )                                                                   | $ | (7,226                                                              | )
|                                                  |  |                                  |         |                                                                     |   |                                                                     |  
|Manager - Net loss                                |  | $                                | (1,054  | )                                                                   | $ | (286                                                                | )
|Shareholders - Net loss                           |  | $                                | (46,792 | )                                                                   | $ | (6,991                                                              | )
|Net loss per share                                |  | $                                | (50,149 | )                                                                   | $ | (7,493                                                              | )

Year Ended December 31, 2006 Compared to the Period March 21, 2005
(Inception) through December 31, 2005

For the year ended December 31, 2006, the period March 21, 2005 (Inception)
through December 31, 2005 and the period March 21, 2005 (Inception) through
December 31, 2006, the loss from operations totaled approximately $52.4 million,
$8.8 million and $61.2 million, respectively.  The losses for the year
ended December 31, 2006, the period March 21, 2005 (Inception) through December
31, 2005 and the period March 21, 2005 (Inception) through December 31, 2006,
were primarily a result of five projects that were determined to be dry-holes,
investment fees and management fees.

Operating Revenues. From inception of the Fund in March 2005
through December 31, 2006, the Fund is considered an exploratory stage
enterprise and has not recorded any operating revenues.

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, the period March 21,
2005 (Inception) through December 31, 2005 and the period March 21, 2005
(Inception) through December 31, 2006.

-24-



---



##### 

|                        |  | For the year ended   December 31,   2006 |        | For the period March 21, 2005 (Inception) through December
31, 2005 |   | For the period March 21, 2005 (Inception) through December
31, 2006 | 
|----------------------- |  | ---------------------------------------- | ------ | ------------------------------------------------------------------- | - | ------------------------------------------------------------------- | 
|                        |  |                                          |        |                                                                     |   |                                                                     | 
|                        |  | (in thousands)                           |       
|Dry-hole   costs        |  |                                          |        |                                                                     |   |                                                                     | 
|South Marsh 231         |  | $                                        | 8,437  |                                                                     | $ |                                                                    | 
|West Cameron 265        |  |                                          | 21,469 |                                                                     |   | 581                                                                 | 
|West Cameron 109        |  |                                          | 8,203  |                                                                     |   |                                                                    | 
|Green Canyon 246        |  |                                          | 4,843  |                                                                     |   |                                                                    | 
|South Timbalier 135/136 |  |                                          | 5,166  |                                                                     |   |                                                                    | 
|                        |  |                                          |        |                                                                     |   |                                                                     | 
|                        |  | $                                        | 48,118 |                                                                     | $ | 581                                                                 | 
|                        |  |                                          |        |                                                                     |   |                                                                     | 

Investment Fee. The Manager was paid a one time investment fee of
4.5% of initial capital contributions. 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 period March 21, 2005 (Inception) through December 31, 2005 were
approximately $6.3 million.  There was no investment fee paid in
2006.

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, the period March 21,
2005 (Inception) through December 31, 2005 and the period March 21, 2005
(Inception) through December 31, 2006 totaled approximately $3.5 million, $1.9
million and $5.3 million, respectively.   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 dry-hole expenses incurred
by the Fund.  For the Fund, the management fee will be reduced by $0.1
million per month, based upon dry-hole expenses of $48.7 million from inception
to date.

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, which increased
due to an increase in the number of required SEC filings during 2006. 
Fiduciary fees represent bank fees associated with the management of the
Funds short-term investment portfolio in US Treasury Notes and have
increased in 2006 due to greater investment activity. 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 increase is attributable to increased drilling in
2006 compared to 2005.

The following table summarizes general and administrative expenses for the year
ended December 31, 2006, the period March 21, 2005 (Inception) through December
31, 2005 and the period March 21, 2005 (Inception) through December 31,
2006.

|                                       |  | For the year ended   December 31,   2006 |     | For the period March 21, 2005 (Inception) through December
31, 2005 |   | For the period March 21, 2005 (Inception) through December
31, 2006 | 
|-------------------------------------- |  | ---------------------------------------- | --- | ------------------------------------------------------------------- | - | ------------------------------------------------------------------- | 
|                                       |  |                                          |     |                                                                     |   |                                                                     | 
|                                       |  | (in thousands)                           |    
|General   and administrative expenses: |  |                                          |     |                                                                     |   |                                                                     | 
|Accounting   and legal fees            |  | $                                        | 169 |                                                                     | $ | 80                                                                  | 
|Insurance                              |  |                                          | 484 |                                                                     |   | 33                                                                  | 
|Fiduciary   fees                       |  |                                          | 164 |                                                                     |   | 8                                                                   | 
|Other                                  |  |                                          |    |                                                                     |   | 7                                                                   | 
|                                       |  |                                          |     |                                                                     |   |                                                                     | 
|                                       |  | $                                        | 817 |                                                                     | $ | 128                                                                 | 
|                                       |  |                                          |     |                                                                     |   |                                                                     | 

Other Income.  Other income is comprised solely of interest
income and represents interest earned on money market accounts and short-term US
Treasury Notes.  Interest income for the year ended December 31, 2006, the
period March 21, 2005 (Inception) through December 31, 2005 and the period March
21, 2005 (Inception) through December 31, 2006, totaled approximately $4.6
million, $1.6 million and $6.1 million, respectively.  In 2006 the average
monthly interest income increased as a result of higher interest rates in 2006
as compared to 2005, as well as a full year of interest income compared to the
2005 period.

-25-



---



##### 

Other Comprehensive (Loss) Income.  Other comprehensive
(loss) income is comprised solely of unrealized (losses) gains on short-term
investments and represents unrealized (losses) gains on available-for-sale
marketable debt securities.  For the period March 21, 2005 (Inception)
through December 31, 2005, other comprehensive income totaled approximately $51
thousand.  During 2006, the US Treasury Note reached its maturity and the
previously recorded unrealized gain was reclassified to other income.  As
of December 31, 2006, all investments in short-term US Treasury Notes are
considered held-to-maturity investments and are recorded at cost plus accrued
interest.

Capital Resources and Liquidity

Operating Cash FlowsCash flow used in operating activities
for the year ended December 31, 2006 was $3.1 million, primarily related to
payments for management fees and general and administrative expenses of $3.5
million and $0.8 million, respectively, and a decrease in working capital of
$0.6 million, offset by interest income received of $1.8 million.

Cash flow used in operating activities for the period March 21, 2005 (Inception)
through December 31, 2005 was approximately $7.1 million, primarily related to
payments for investment fees and management fees of approximately $6.3 million
and approximately $1.9 million, respectively, offset by interest income received
of approximately $1.1 million.

Cash flow used in operating activities for the period March 21, 2005 (Inception)
through December 31, 2006 was approximately $10.2 million, primarily related to
payments for investment fees, management fees, and general and administrative
expenses of approximately $6.3 million, $5.3 million, and $0.9 million,
respectively, and a decrease in working capital of $0.5 million offset by
interest income received of approximately $2.9 million.

Investing Cash FlowsCash flow provided by investing
activities for the year ended December 31, 2006 was approximately $21.2 million.
The Fund received proceeds of approximately $130.1 million from marketable
securities that matured during 2006 and made investments in marketable
securities of approximately $89.1 million. Cash used in investing activities
primarily related to capital expenditures of approximately $8.6 million for
unproved oil and natural gas properties and $11.1 million for properties that
were determined to be unsuccessful, or dry-holes, during 2006.

Cash flow used in investing activities for the period March 21, 2005 (Inception)
through December 31, 2005 was approximately $109.8 million, primarily related to
investments in marketable securities of $83.3 million, cash expenditures of
approximately $24.9 million for payment to operators for working interests and
expenditures and approximately $0.6 million of capital expenditures for oil and
natural gas properties that were determined to be unsuccessful, or
dry-holes. Additionally, the Fund made investments in marketable securities of
approximately $84.3 million, inclusive of the salvage fund.

Cash flow used in investing activities for the period March 21, 2005 (Inception)
through December 31, 2006 was approximately $88.6 million, primarily related to
$8.6 million of capital expenditures for oil and natural gas properties, and
$36.6 million for properties that were determined to be unsuccessful, or
dry-holes. Additionally, the Fund made investments in marketable securities of
approximately $173.4 million, inclusive of the salvage fund, of which
approximately $130.1 million matured during 2006.

Financing Cash FlowsCash flow used in financing activities
for the year ended December 31, 2006 was approximately $2 thousand related to
cash expenditures for payment of syndication costs.

Cash flow provided by financing activities for the period March 21, 2005
(Inception) through December 31, 2005 and for the period March 21, 2005
(Inception) through December 31, 2006 was approximately $122.4 million,
primarily related to cash receipts of $138.3 million obtained from the
Funds private offering, offset by $15.9 million of payments for
syndication costs.

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 $5.8 million,
all of which is expected to be paid out of unspent capital contributions within
the following 12 months.

-26-



---



##### 

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.

|Estimated   Capital Expenditures   As of December 31, 2006 |  | Spent Through   December 31, 2006 |        | To be Spent by December 31, 2007 |  
|---------------------------------------------------------- |  | --------------------------------- | ------ | -------------------------------- | -
|                                                           |  |                                   |        |                                  |  
|                                                           |  | (in thousands)                    |       
|Projects                                                   |  |                                   |        |                                  |  
|South Marsh Island 231   (i)                               |  | $                                 | 8,437  |                                  | $
|West Cameron 265/266   (ii)                                |  |                                   | 22,050 |                                  |  
|West Cameron 109 (iii)                                     |  |                                   | 8,203  |                                  |  
|Green Canyon 246 (iv)                                      |  |                                   | 4,843  |                                  |  
|South Timbalier 135/136   (iv)                             |  |                                   | 5,166  |                                  |  
|West Cameron 593 (v)                                       |  |                                   | 10,679 |                                  |  
|                                                           |  |                                   |        |                                  |  
|                                                           |  | $                                 | 59,379 |                                  | $
|                                                           |  |                                   |        |                                  |  

|     
|-----
|(i)  
|(ii) 
|(iii)
|(iv) 
|(v)  

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 dry-hole expenses incurred by the Fund.  For the
Fund, the management fee will be reduced by $0.1 million per month based upon
dry-hole expenses of $48.7 million from inception through December 31,
2006.

With respect to the payment of management fees, 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
December 31, 2005 and does not anticipate the use of such arrangements in the
future.

-27-



---



##### 

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 and December 31, 2005.

ITEM 7A.  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 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All financial statements meeting the requirements of Regulation S-X and the
supplementary financial information required by Item 302 of Regulation S-K are
included in the financial statements listed in Item 15 and filed as part of this
report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE

As reported on a Form 8-K filed with the SEC on July 27, 2006, the Manager of
the Fund dismissed Perelson Weiner, LLP as the Funds independent
registered public accountants effective June 8, 2006.

The Fund was formed on March 21, 2005 and filed its Registration Statement on
Form 10 in April 2006; thus, the period beginning March 21, 2005 (Inception) and
ended December 31, 2005 was the Funds first audited reporting
period.  Perelson Weiners audit report on the financial statements of
the Fund for the period March 21, 2005 (inception) through December 31, 2005 did
not contain an adverse opinion or disclaimer of opinion, nor was such report
qualified or modified as to uncertainty, audit scope or accounting
principles.

From the date of inception of the Fund through June 8, 2006, there were no
disagreements with Perelson Weiner on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Perelson Weiner, would
have caused Perelson Weiner to make reference to the subject matter of the
disagreements in their report on the Funds financial statements for such
period.

From the date of inception of the Fund through June 8, 2006, there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation
S-K.

As reported on a Form 8-K filed with the SEC on July 13, 2006, the Manager of
the Fund appointed Deloitte & Touche LLP (D&T) as the
Funds independent registered public accountants effective July 12,
2006.

-28-



---



##### 

ITEM 9A.  CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Fund maintains disclosure controls and procedures, as such term
is defined under Securities and Exchange Act of 1934 (Exchange Act)
Rule 13a-15(e), that are designed to ensure that information required to be
disclosed in the Funds Exchange Act reports is recorded, processed,
summarized and reported within the same time periods specified in the SECs
rules and forms, and that such information is accumulated and communicated to
its management, including its Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosures. In designing and evaluating the disclosure controls and procedures,
the Funds management recognized that any controls and procedures, no
matter how well designed and operated, can provide only reasonable assurance of
achieving the desired control objectives and its management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. The Fund has carried out an evaluation, as of
December 31, 2006, under the supervision and with the participation of its
management, including its Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Funds disclosure
controls and procedures.  Based upon their evaluation and subject to the
foregoing, such procedures were effective.

Changes in Internal Controls over Financial Reporting

In previous Exchange Act filings, the Fund has disclosed material
weaknesses.  Corrective actions have been implemented to address these
material weaknesses.   As of the period covered by this report,
Management believes these material weaknesses have been remediated.

In the fourth quarter of 2006, the following material changes in internal
control over financial reporting (as defined in Exchange Act Rule 13a-15(f))
have been implemented:

| |  | Expansion of accounting and SEC reporting staff and various resources, by hiring
five personnel with GAAP and/or SEC accounting and reporting
expertise;                                          
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Created detailed training programs, and policies and procedures surrounding the
accounting for oil and natural gas projects and GAAP and SEC financial reporting
controls; and                    
| |  | Enhanced tools and added appropriate resources to perform consistent, routine
analytical reviews of the GAAP financial results, including key balance sheet
and income statement account analyses.

Because the Fund is not an Accelerated Filer as defined in Rule
12b-2 of the Exchange Act, the Fund is not presently required to file
Managements annual report on internal control over financial reportingand the Attestation report of the registered public accounting firm
required by Item 308(a) and (b) of Regulation S-K promulgated under the
Securities Act.  Under current rules, because the Fund is neither a
large accelerated filer nor an accelerated filer, the
Fund is not required to provide managements report on internal control
over financial reporting until the Fund files its annual report for 2007 and
compliance with the auditors attestation report requirement is not
required until the Fund files its annual report for 2008.  The Fund
currently expects to comply with these requirements at such time as the Fund is
required to do so.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE

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.

-29-



---



##### 

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                                                |  |                 | 
|Executive Vice   President                                        |  | 2006            | 

Set forth below are the names 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.

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.

-30-



---



##### 

Board of Directors and Board CommitteesThe 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 11 of
this Form 10-K.  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.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Funds executive officers and directors, and persons who own more than 10%
of a registered class of the Funds equity securities, to file reports of
ownership and changes in ownership with the SEC. Based on a review of the copies
of reports furnished or otherwise available to the Fund, the Fund believes that
during the year ended December 31, 2006, all filing requirements applicable to
its officers, directors and 10% beneficial owners were met.

ITEM 11.  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 13. Certain Relationships and Related
Transactions and Director Independence for more information regarding
Manager compensation and payments to affiliated entities.

Compensation Discussion and AnalysisThe 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 our Manager and provide managerial services to all of the funds managed by our 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 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED SECURITY HOLDER MATTERS

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 933.0600 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 |  |                    | 1.6667 |         | 
|Executive officers as a group (1)                            |  |                    | 1.6667 |         | 

|                                                                             
|-----------------------------------------------------------------------------
|* Represents less than one percent.                                          
|(1) Includes shares owned by the spouse of Mr. Swanson or one of his
Trusts.

-31-



---



##### 

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE

In connection with the sale of shares in 2005, Ridgewood Securities Corporation,
an affiliate of the Manager, earned a placement fee and commissions totaling
approximately $1.6 million included in syndication costs. The Manager earned an
investment fee for the services of investigating and evaluating projects for
future investment totaling approximately $6.3 million.

The Manager was paid approximately $4.9 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. Additionally, when distributions are made, the Manager
is entitled to a portion of funds distributed to shareholders.  For the
year ended December 31, 2006, the period March 21, 2005 (Inception) through
December 31, 2005 and the period March 21, 2005 (Inception) through December 31,
2006 the manager was paid fees which totaled approximately $3.5 million, $1.9
million and $5.3 million, respectively. There have been no distributions for the
period March 21, 2005 (Inception) 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
dry-hole expenses incurred by the Fund.  For the P Fund, the management fee
will be reduced by $0.1 million per month, based upon dry-hole expenses of $48.7
million from inception through December 31, 2006.

Profits and losses are allocated in accordance with the LLC 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 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table presents fees and services rendered by Deloitte and Touche,
LLP for the year ended December 31, 2006 and Perelson Weiner LLP for the period
March 21, 2005 (Inception) through December 31, 2005:

|               |  | Year   ended   December 31,   2006 |     | For the period March 21, 2005 (Inception) through December
31, 2005 |  
|-------------- |  | ---------------------------------- | --- | ------------------------------------------------------------------- | -
|               |  |                                    |     |                                                                     |  
|               |  | (in thousands)                     |    
|Audit Fees (1) |  | $                                  | 125 |                                                                     | $
|Tax fees (2)   |  |                                    | 38  |                                                                     |  
|               |  |                                    |     |                                                                     |  
|Total          |  | $                                  | 163 |                                                                     | $
|               |  |                                    |     |                                                                     |  

|   
|---
|(1)
|(2)

PART IV.

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) (1)     Financial Statements

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

(a) (2)     Financial Statement Schedules

None.

-32-



---



##### 

Exhibits

|Exhibit   No. |       | Description
|------------- | ----- | -----------
|              |       |            
|3             | (i)   |            
|              |       |            
|3             | (ii)  |            
|              |       |            
|3             | (iii) |            
|              |       |            
|10.1          |       |            
|              |       |            
|10.2          |       |            
|              |       |            
|10.3          |       |            
|              |       |            
|10.4          |       |            
|              |       |            
|10.5          |       |            
|              |       |            
|10.6          |       |            
|              |       |            
|10.7          |       |            
|              |       |            
|31.1          |       | *          
|              |       |            
|31.2          |       | *          
|              |       |            
|32            |       | *          

-33-



---



##### 

|                                                                                                                                                                                                                                    |  | Page
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                                                                                                    |  |     
|INDEX TO FINANCIAL STATEMENTS                                                                                                                                                                                                       |  |     
|Report of Independent Registered Public Accounting
Firm                                                                                                                                                                             |  | F-2 
|Balance Sheets as of December 31, 2006 and December 31,
2005                                                                                                                                                                        |  | F-3 
|Statements of Operations and Other Comprehensive Loss for the
year ended December 31, 2006, the period March 21, 2005 (Inception) through
December 31, 2005 and for the period March 21, 2005 (Inception) through December
31, 2006 |  | F-4 
|Statements of Changes in Members Capital for the year
ended December 31, 2006, the period March 21, 2005 (Inception) to December 31,
2005 and the period March 21, 2005 (Inception) to December 31,
2006                           |  | F-5 
|Statements of Cash Flows for the year ended December 31, 2006,
the period March 21, 2005 (Inception) through December 31, 2005 and for the
period March 21, 2005 (Inception) through 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 P Fund, LLC:

We have audited the accompanying balance sheets of Ridgewood Energy P Fund, LLC
(an exploratory stage enterprise) (the Fund) as of December 31, 2006
and 2005, the related statements of operations and other comprehensive loss and
cash flows for the year ended December 31, 2006, for the period March 21, 2005
(Inception) through December 31, 2005 and for the period March 21, 2005
(Inception) through December 31, 2006 and the related statements of changes in
members capital for the year ended December 31, 2006 and for the period
March 21, 2005 (Inception) through December 31, 2005.  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 audits.

We conducted our audits 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 audits 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 audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of Ridgewood Energy P Fund, LLC at December 31,
2006 and 2005, and the results of its operations and its cash flows for the year
ended December 31, 2006, for the period March 21, 2005 (Inception) through
December 31, 2005 and for the period March 21, 2005 (Inception) through December
31, 2006, in conformity with accounting principles generally accepted in the
United States of America.

/s/ Deloitte and Touche LLP

March 30, 2007 Parsippany, New Jersey

F-2



---



##### 

RIDGEWOOD ENERGY P FUND, LLC (An exploratory stage enterprise)
BALANCE SHEETS (in thousands, except for share data)

|                                                                                          |  | December 31, |        
|----------------------------------------------------------------------------------------- |  | ------------ | -------
|                                                                                          |  |              |        
|                                                                                          |  | 2006         |        
|                                                                                          |  |              |        
|ASSETS                                                                                    |  |              |        
|Current assets:                                                                           |  |              |        
|Cash and cash   equivalents                                                               |  | $            | 23,667 
|Short-term investment   in marketable securities                                          |  |              | 45,490 
|Other current assets                                                                      |  |              | 638    
|                                                                                          |  |              |        
|Total current assets                                                                      |  |              | 69,795 
|                                                                                          |  |              |        
|Salvage fund                                                                              |  |              | 1,060  
|Oil and gas properties                                                                    |  |              |        
|Advances to operators   for working interests and expenditures                            |  |              |       
|Proved properties                                                                         |  |              | 10,679 
|                                                                                          |  |              |        
|Total oil and gas   properties                                                            |  |              | 10,679 
|                                                                                          |  |              |        
|Total assets                                                                              |  | $            | 81,534 
|                                                                                          |  |              |        
|LIABILITIES AND MEMBERS CAPITAL                                                          |  |              |        
|Current liabilities:                                                                      |  |              |        
|Due to operator                                                                           |  | $            | 14,020 
|Accrued expenses   payable                                                                |  |              | 94     
|Due to affiliates (Note   7)                                                              |  |              |       
|                                                                                          |  |              |        
|Total current   liabilities                                                               |  |              | 14,114 
|Non-current liabilities:                                                                  |  |              |        
|Asset retirement   obligation                                                             |  |              | 97     
|                                                                                          |  |              |        
|Total liabilities                                                                         |  |              | 14,211 
|                                                                                          |  |              |        
|Commitments and contingencies (Note 9)                                                    |  |              |        
|Members capital:                                                                         |  |              |        
|Manager:                                                                                  |  |              |        
|Deficit accumulated   during the exploratory stage                                        |  |              | (1,340 
|                                                                                          |  |              |        
|Managers total                                                                           |  |              | (1,340 
|                                                                                          |  |              |        
|Shareholders:                                                                             |  |              |        
|Capital contributions (1,335 shares authorized; 933.0600 shares issued   and outstanding) |  |              | 138,344
|Syndication costs                                                                         |  |              | (15,898
|Deficit accumulated   during the exploratory stage                                        |  |              | (53,783
|Accumulated other   comprehensive income                                                  |  |              |       
|                                                                                          |  |              |        
|Shareholders total                                                                       |  |              | 68,663 
|                                                                                          |  |              |        
|Total members capital                                                                    |  |              | 67,323 
|                                                                                          |  |              |        
|Total liabilities and   members capital                                                  |  | $            | 81,534 
|                                                                                          |  |              |        

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

F-3



---



##### 

RIDGEWOOD ENERGY P FUND, LLC (An exploratory stage enterprise)
STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS (in thousands, except
per share data)

|                                                  |  | For   the year ended   December 31,   2006 |         | For the period March 21, 2005 (Inception) through December
31, 2005 |   | For the period March 21, 2005 (Inception) through December
31, 2006 |  
|------------------------------------------------- |  | ------------------------------------------ | ------- | ------------------------------------------------------------------- | - | ------------------------------------------------------------------- | -
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Revenue                                           |  |                                            |         |                                                                     |   |                                                                     |  
|Oil and gas revenue                               |  | $                                          |        |                                                                     | $ |                                                                    |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Expenses                                          |  |                                            |         |                                                                     |   |                                                                     |  
|Dry-hole costs                                    |  |                                            | 48,118  |                                                                     |   | 581                                                                 |  
|Investment fees to   affiliate (Note 7)           |  |                                            |        |                                                                     |   | 6,281                                                               |  
|Management fees to   affiliate (Note 7)           |  |                                            | 3,459   |                                                                     |   | 1,851                                                               |  
|General and   administrative expenses             |  |                                            | 817     |                                                                     |   | 128                                                                 |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Total expenses                                    |  |                                            | 52,394  |                                                                     |   | 8,841                                                               |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Loss from operations                              |  |                                            | (52,394 | )                                                                   |   | (8,841                                                              | )
|Other income                                      |  |                                            |         |                                                                     |   |                                                                     |  
|Interest income                                   |  |                                            | 4,566   |                                                                     |   | 1,564                                                               |  
|Realized loss on   marketable securities          |  |                                            | (18     | )                                                                   |   |                                                                    |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Total other income                                |  |                                            | 4,548   |                                                                     |   | 1,564                                                               |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Net loss                                          |  |                                            | (47,846 | )                                                                   |   | (7,277                                                              | )
|Other comprehensive (loss) gain                   |  |                                            |         |                                                                     |   |                                                                     |  
|Unrealized (loss) gain   on marketable securities |  |                                            | (51     | )                                                                   |   | 51                                                                  |  
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Total comprehensive   loss                        |  | $                                          | (47,897 | )                                                                   | $ | (7,226                                                              | )
|                                                  |  |                                            |         |                                                                     |   |                                                                     |  
|Manager - Net  loss                               |  | $                                          | (1,054  | )                                                                   | $ | (286                                                                | )
|Shareholders - Net loss                           |  | $                                          | (46,792 | )                                                                   | $ | (6,991                                                              | )
|Net loss per share                                |  | $                                          | (50,149 | )                                                                   | $ | (7,493                                                              | )

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

F-4



---



##### 

RIDGEWOOD ENERGY P FUND, LLC (An exploratory stage enterprise)
STATEMENT OF CHANGES IN MEMBERS CAPITAL (in thousands, except for
share data)

|                                                                                                                                                                                                 |  | # of   Shares |        | Manager |   | Shareholders |   | Total |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ------ | ------- | - | ------------ | - | ----- | -------
|                                                                                                                                                                                                 |  |               |        |         |   |              |   |       |        
|Balances, March 21, 2005   (Inception)                                                                                                                                                           |  |               |       |         | $ |             |   | $     |       
|Shareholders capital contributions                                                                                                                                                              |  |               | 933.06 |         |   |             |   |       | 138,344
|Syndication costs (included offering fee of $4,885 paid to the Manager and
selling commissions and placement fees of $258 and $1,384, respectively, paid to
Ridgewood Securities Corp. - Note 7) |  |               |       |         |   |             |   |       | (15,898
|Net loss incurred during the exploratory stage                                                                                                                                                   |  |               |       |         |   | (286         | ) |       | (6,991 
|Other comprehensive income                                                                                                                                                                       |  |               |       |         |   |             |   |       | 51     
|                                                                                                                                                                                                 |  |               |        |         |   |              |   |       |        
|Balances, December 31, 2005                                                                                                                                                                      |  |               | 933.06 |         |   | (286         | ) |       | 115,506
|Net loss incurred during the exploratory stage                                                                                                                                                   |  |               |       |         |   | (1,054       | ) |       | (46,792
|Other comprehensive loss                                                                                                                                                                         |  |               |       |         |   |             |   |       | (51    
|                                                                                                                                                                                                 |  |               |        |         |   |              |   |       |        
|Balances, December 31, 2006                                                                                                                                                                      |  |               | 933.06 |         | $ | (1,340       | ) | $     | 68,663 
|                                                                                                                                                                                                 |  |               |        |         |   |              |   |       |        

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

F-5



---



##### 

RIDGEWOOD ENERGY P FUND, LLC (An exploratory stage enterprise)
STATEMENTS OF CASH FLOWS (in thousands)

|                                                                                                                                   |  | Year   ended   December 31, 2006 |         | For   the period   March 21, 2005   (Inception)   through   December 31, 2005 |   | For   the period   March 21, 2005   (Inception)   through   December 31, 2006 |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ------- | ----------------------------------------------------------------------------- | - | ----------------------------------------------------------------------------- | -
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Cash flows from operating   activities                                                                                             |  |                                  |         |                                                                               |   |                                                                               |  
|Net loss                                                                                                                           |  | $                                | (47,846 | )                                                                             | $ | (7,277                                                                        | )
|Adjustments to reconcile net loss to net cash used in operating
activities                                                         |  |                                  |         |                                                                               |   |                                                                               |  
|Dry-hole costs                                                                                                                     |  |                                  | 48,118  |                                                                               |   | 581                                                                           |  
|Interest earned on   marketable securities                                                                                         |  |                                  | (2,772  | )                                                                             |   | (463                                                                          | )
|Loss on the sale of   marketable securities                                                                                        |  |                                  | 18      |                                                                               |   |                                                                              |  
|Changes in assets and   liabilities:                                                                                               |  |                                  |         |                                                                               |   |                                                                               |  
|Increase in other   current assets                                                                                                 |  |                                  | (559    | )                                                                             |   | (55                                                                           | )
|Increase in accrued   expenses payable                                                                                             |  |                                  | 5       |                                                                               |   | 81                                                                            |  
|(Decrease) increase in   due to affiliates                                                                                         |  |                                  | (27     | )                                                                             |   | 11                                                                            |  
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Net cash used in   operating activities                                                                                            |  |                                  | (3,063  | )                                                                             |   | (7,122                                                                        | )
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Cash flows from investing activities                                                                                               |  |                                  |         |                                                                               |   |                                                                               |  
|Payments to operators   for working interests and expenditures                                                                     |  |                                  |        |                                                                               |   | (24,942                                                                       | )
|Capital expenditures for oil and gas properties                                                                                    |  |                                  | (8,623  | )                                                                             |   |                                                                              |  
|Capital expenditures for unsuccessful properties                                                                                   |  |                                  | (11,115 | )                                                                             |   | (581                                                                          | )
|Salvage fund   investments                                                                                                         |  |                                  | (46     | )                                                                             |   | (1,014                                                                        | )
|Proceeds from the sale   of marketable securities                                                                                  |  |                                  | 130,070 |                                                                               |   |                                                                              |  
|Investment in   marketable securities                                                                                              |  |                                  | (89,087 | )                                                                             |   | (83,256                                                                       | )
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Net cash provided by (used in) investing activities                                                                                |  |                                  | 21,199  |                                                                               |   | (109,793                                                                      | )
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Cash flows from financing   activities                                                                                             |  |                                  |         |                                                                               |   |                                                                               |  
|Contributions from   shareholders                                                                                                  |  |                                  |        |                                                                               |   | 138,344                                                                       |  
|Syndication costs paid                                                                                                             |  |                                  | (2      | )                                                                             |   | (15,896                                                                       | )
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Net cash (used in)   provided by financing activities                                                                              |  |                                  | (2      | )                                                                             |   | 122,448                                                                       |  
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Net increase in cash and cash equivalents                                                                                          |  |                                  | 18,134  |                                                                               |   | 5,533                                                                         |  
|Cash and cash equivalents, beginning of period                                                                                     |  |                                  | 5,533   |                                                                               |   |                                                                              |  
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Cash and cash   equivalents, end of period                                                                                         |  | $                                | 23,667  |                                                                               | $ | 5,533                                                                         |  
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  
|Supplemental schedule of noncash investing activities                                                                              |  |                                  |         |                                                                               |   |                                                                               |  
|Advances used for capital expenditures in oil and gas properties reclassified to
unproved properties or expensed as dry-hole costs |  | $                                | 24,942  |                                                                               | $ |                                                                              |  
|                                                                                                                                   |  |                                  |         |                                                                               |   |                                                                               |  

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

F-6



---



##### 

RIDGEWOOD ENERGY P FUND, LLC(An exploratory stage enterprise)NOTES TO FINANCIAL STATEMENTS

1. Organization and Purpose

The Ridgewood Energy P Fund, LLC (Fund), a Delaware limited
liability company, was formed on March 21, 2005 and operates  pursuant to a
limited liability company agreement (Agreement) dated as of May 16,
2005 by and among Ridgewood Energy Corporation (Manager), and the
shareholders of the Fund.   Although the date of formation is March
21, 2005, the Fund did not begin business activities until May 16, 2005 when it
began its private offering of shares.  There were no business activities
prior to May 16, 2005.

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

Use of EstimatesThe 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 ExpendituresThe
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 PropertiesInvestments 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.

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.

F-7



---



##### 

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 and 2005 amounts recorded in due to operators totaling
approximately $14.0 million and nil, respectively, related to the acquisition of
oil and gas property, both successful and unsuccessful.

Revenue RecognitionOil 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 and 2005, there were no
oil or natural gas balancing arrangements between the Fund and other working
interest owners.

Syndication CostsDirect 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 ObligationsFor 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          |  |                   | 767 
|Liabilities settled           |  |                   | (670
|                              |  |                   |     
|Balance - End of period       |  | $                 | 97  
|                              |  |                   |     

Impairment of Long-Lived AssetsIn accordance with the provisions of
SFAS No. 144, Accounting for the Impairment of Long-Lived
Assets, 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 flows
attributable 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 AmortizationDepletion 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 and December 31, 2005, the Fund did not have accumulated depletion as
production has not yet occurred.

Income TaxesNo 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.

F-8



---



##### 

Cash and cash equivalentsAll 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 and December 31, 2005, bank balances
inclusive of the salvage fund exceeded federally insured limits by approximately
$23.5 million and $5.3 million, respectively.  The Fund maintains bank
deposits with accredited financial institutions to mitigate such risk.

Salvage FundPursuant 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 AllocationProfits 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.

3.Recent Accounting Standards

In February 2007, the Financial Accounting Standards Board (FASB)
issued SFAS 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. 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.

In September 2006, the FASB issued SFAS 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 expect this guidance to have a material impact on
the financial statements.

In September 2006, the SEC Staff issued Staff Accounting Bulletin
(SAB) 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 requires 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.

F-9



---



##### 

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.

The following table reflects the net changes in unproved properties for the
years ended December 31, 2006 and 2005.  As of December 31, 2006 and 2005,
the Fund had no capitalized exploratory well costs greater than one
year.

|                                                                                               |  | December 31,   |        
|---------------------------------------------------------------------------------------------- |  | -------------- | -------
|                                                                                               |  |                |        
|                                                                                               |  | 2006           |        
|                                                                                               |  |                |        
|                                                                                               |  | (in thousands) |        
|Balance - Beginning of the   period                                                            |  | $              |       
|Additions to capitalized   exploratory well costs pending the determination of proved reserves |  |                | 10,582 
|Reclassifications to proved   properties based on the determination of proved reserves         |  |                | (10,582
|Capitalized exploratory   well costs charged to dry hole costs                                 |  |                |       
|                                                                                               |  |                |        
|Balance - End of the period                                                                    |  | $              |       
|                                                                                               |  |                |        

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

Short-term investments are comprised of United States Treasury Notes with
maturities greater than six 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.  Held-to maturity investments as of
December 31, 2006 were $45.5 million and mature in January and May
2007.

Available for sale securities are carried in the financial statements at fair
value.  The Fund had no short-term investments considered available for
sale as of December 31, 2006.   Available for sale investments as of
December 31, 2006 matured in May 2006.  The following table is a summary of
short-term investments considered available for sale at December 31,
2005.

|                    |  |      | As of December 31, 2005 |                        |  
|------------------- |  | ---- | ----------------------- | ---------------------- | -
|                    |  |      |                         |                       
|                    |  | Cost |                         | Gross Unrealized Gains |  
|                    |  |      |                         |                        |  
|                    |  |      |                         | (in thousands)         |  
|Available-for-Sale  |  |      |                         |                        |  
|U.S. Treasury Notes |  | $    | 83,719                  |                        | $

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 LLC 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.

F-10



---



##### 

Available Cash from Dispositions, as defined in the Funds LLC 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 capital contributions.  These fees are payable for services
provided by the Manager of locating, investigating and evaluating investment
opportunities and effecting transactions when the capital contribution is
made.  For the period March 21, 2005 (Inception) through December 31, 2005,
investment fees were approximately $6.3 million.  Of this amount nil and
approximately $12 thousand were included in due to affiliates at December 31,
2006 and December 31, 2005, respectively.  In 2006, there were no
investment fees.

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 $3.5 million, $1.9 million and $5.3
million were incurred and paid for the year ended December 31, 2006, for the
period March 21, 2005 (Inception) through December 31, 2005, and for the period
from March 21, 2005 (Inception) through December 31, 2006, respectively. 
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 to cover expenses incurred in the offer and sale of shares of the
Fund.  Such offering fee was included in syndication costs (Note 2) of
approximately $15.9 million.  For the year ended December 31, 2005,
offering fees were $4.9 million.  Of this amount nil and approximately $10
thousand, were included in due to affiliates as of December 31, 2006 and
December 31, 2005, respectively.

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.  As of December 31, 2006 and December 31, 2005, the Manager owed
the Fund approximately nil and $1 thousand, respectively, for the overpayment of
fees which is included in due to affiliates.

In 2005, Ridgewood Securities Corporation, a registered broker-dealer affiliated
with the Manager, was paid selling commissions and placement fees of
approximately $0.3 million and $1.4 million, respectively, for shares of the
Fund sold which are reflected in syndication costs (Note 2).  At December
31, 2006 and December 31, 2005, approximately nil and $9 thousand, respectively,
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

As of December 31, 2006, and for the period March 21, 2005 (Inception) through
December 31, 2005, 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 ConsiderationsThe 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.  As of December 31, 2006 and
December 31, 2005, there were no known environmental issues that required the
Fund to record a liability.

Insurance CoverageThe 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.  Moreover, insurance is obtained as a package covering all of the
Managers investment programs.  Claims made by other such programs can
reduce or eliminate insurance for the Fund.

F-11



---



##### 

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 through V provide historical
cost information pertaining to capitalized costs, costs incurred in exploration,
and property acquisitions and development.

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 and Alabama in
the Gulf of Mexico.

Table I - Capitalized Costs Related to Oil and Gas Producing Activities (in thousands)

|                                                             |  | December 31, |       
|------------------------------------------------------------ |  | ------------ | ------
|                                                             |  |              |       
|                                                             |  | 2006         |       
|                                                             |  |              |       
|Proved oil and gas properties                                |  | $            | 10,679
|Unproved oil and gas properties                              |  |              |      
|Advances to operators for working interests and expenditures |  |              |      
|                                                             |  |              |       
|Total oil and gas   properties                               |  | $            | 10,679
|                                                             |  |              |       

Table II - Costs Incurred in Exploration, Property Acquisitions and
Development (in thousands)

|                                         |  | For the year   ended   December 31,   2006 |        | For the period   March 21, 2005   (Inception)   through   December 31,   2005 |  
|---------------------------------------- |  | ------------------------------------------ | ------ | ----------------------------------------------------------------------------- | -
|                                         |  |                                            |        |                                                                               |  
|Exploratory drilling costs - capitalized |  | $                                          | 10,679 |                                                                               | $
|Exploratory drilling costs - expensed    |  |                                            | 23,177 |                                                                               |  
|                                         |  |                                            |        |                                                                               |  
|                                         |  | $                                          | 33,856 |                                                                               | $
|                                         |  |                                            |        |                                                                               |  

F-12



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##### 

Table III - Reserve Quantity Information (Unaudited)

Oil and gas reserves of the Fund have been estimated by an independent petroleum
engineer for the year ended December 31, 2006.  The reserve estimates for
December 31, 2006 were based on estimated future reserves as of September 30,
2006 provided by an independent petroleum engineer.  These reserves have
been prepared in compliance with the Securities and Exchange Commission
rules.

Proved reserves are classified as either developed or undeveloped.  Proved
developed reserves are the quantities expected to be recovered through existing
wells with existing equipment and operating methods.

|                                  |  | December 31, 2006 United States |        
|--------------------------------- |  | ------------------------------- | -------
|                                  |  |                                 |        
|                                  |  | Oil (BBLS)                      |        
|                                  |  |                                 |        
|Proved undeveloped reserves:      |  |                                 |        
|Beginning of Year                 |  |                                 |       
|Discoveries                       |  |                                 | 103,697
|Revisions of previous   estimates |  |                                 |       
|Production                        |  |                                 |       
|                                  |  |                                 |        
|End of year                       |  |                                 | 103,697
|                                  |  |                                 |        

Due to the inherent uncertainties and the limited nature of recovery data,
estimates of reserve information are subject to change as additional information
becomes available.

Table IV - Standardized Measure of Discounted Future Net Cash Flows Related
to Proved Oil and Gas Reserves (Unaudited, in thousands)

Summarized in the following table is information for the Fund with respect to
the standardized measure of discounted future net cash flows relating to proved
oil and gas reserves.  Future cash inflows are computed by applying
year-end prices of oil and gas relating to the Funds proved reserves to
the year-end quantities of those reserves.  Future production, development,
site restoration and abandonment costs are derived based on current costs
assuming continuation of existing economic conditions.

|                                                                     |  | December 31,2006 |       
|-------------------------------------------------------------------- |  | ---------------- | ------
|                                                                     |  |                  |       
|Future estimated revenues                                            |  | $                | 18,028
|Future estimated production costs                                    |  |                  | (974  
|Future estimated development costs                                   |  |                  | (3,463
|                                                                     |  |                  |       
|Future net cash flows                                                |  |                  | 13,591
|10% annual discount for estimated timing of cash   flows             |  |                  | (2,307
|                                                                     |  |                  |       
|Standardized measure of discounted future estimated   net cash flows |  | $                | 11,283
|                                                                     |  |                  |       

F-13



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##### 

Table V - Changes in the Standardized Measure of Discounted Future Net Cash
Flows Related to Proved Oil and Gas Reserves (Unaudited, in thousands)

The changes in present values between years, which can be significant, reflect
changes in estimated proved reserve quantities and prices and assumptions used
in forecasting production volumes and costs.

|                                                                                    |  | Year ended   December 31, 2006 |       
|----------------------------------------------------------------------------------- |  | ------------------------------ | ------
|                                                                                    |  |                                |       
|Standardized measure beginning of the year                                          |  | $                              |      
|Sales of oil and gas production, net of production   costs                          |  |                                |      
|Net changes in prices and production costs                                          |  |                                |      
|Extensions, discoveries, and improved recovery and   techniques, less related costs |  |                                | 11,001
|Development costs incurred during the period                                        |  |                                |      
|Revisions of previous reserve quantities estimate                                   |  |                                |      
|Accretion of discount                                                               |  |                                | 282   
|                                                                                    |  |                                |       
|Standardized measure end of the year                                                |  | $                              | 11,283
|                                                                                    |  |                                |       

It is necessary to emphasize that the data presented should not be viewed as
representing the expected cash flow from, or current value of, existing proved
reserves since the computations are based on a large number of estimates and
arbitrary assumptions.  Reserve quantities cannot be measured with
precision and their estimation requires many judgmental determinations and
frequent revisions.  The required projection of production and related
expenditures over time requires further estimates with respect to pipeline
availability, rates of demand and governmental control.  Actual future
prices and costs are likely to be substantially different from the current
prices and costs utilized in the computation of reported amounts.  Any
analysis or evaluation of the reported amounts should give specific recognition
to the computational methods utilized and the limitations inherent
therein.

11.  Subsequent Events

Management FeeEffective 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 dry-hole expenses incurred by the
Fund.  For the Fund, the management fee will be reduced by $0.1 million per
month, based upon dry-hole expenses of $48.7 million from inception to
date.

Green Canyon 246On January 24, 2007, the Fund was informed by
its operator, Woodside, that the exploratory well being drilled by Woodside in
the Green Canyon 246 lease block did not have commercially productive quantities
of either oil or natural gas and had therefore been deemed an unsuccessful well
or dry-hole.  The Fund owns a working interest in Green Canyon 246. 
Dry-hole costs related to Green Canyon 246, including plug and abandonment
expenses, incurred by the Fund for the year ended December 31, 2006, the period
March 21, 2005 (Inception) through December 31, 2005, and for the period March
21, 2005 (Inception) through December 31, 2006 were approximately $4.8 million,
nil and $4.8 million, respectively.  The Fund incurred additional dry-hole
costs related to Green Canyon 246 of $1.4 million during 2007.

South Timbalier 135/136On January 24, 2007, the Fund was
informed by its operator, Chevron, that the exploratory well being drilled by
Chevron in the South Timbalier 135/136 lease block did not have commercially
productive quantities of either oil or natural gas and has therefore been deemed
an unsuccessful well or dry-hole.  The Fund owns a working interest in
South Timbalier 135/136.  Dry-hole costs related to South Timbalier
135/136, including plug and abandonment expenses, incurred by the Fund for the
year ended December 31, 2006, the period March 21, 2005 (Inception) through
December 31, 2005, and for the period March 21, 2005 (Inception) through
December 31, 2006 were approximately $5.2 million, nil and $5.2 million,
respectively.  The Fund incurred additional dry-hole costs related to South
Timbalier 135/136 of $1.6 million during 2007.

F-14



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##### 

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 P FUND, LLC
|----------------------- | ------------------------------
|                        |                               
|Date:  March   30, 2007 |                               
|                        | By:                           
|                        |                               
|                        |                               
|                        |                               
|                        |                               

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                           |  | March 30, 2007
|                         |  | (Principal Executive Officer)                     |  |               
|Robert E. Swanson        |  |                                                   |  |               
|                         |  |                                                   |  |               
|/s/ KATHLEEN P. MCSHERRY |  | Senior Vice President and Chief Financial Officer |  | March 30, 2007
|                         |  | (Principal Accounting Officer)                    |  |               
|Kathleen P. McSherry     |  |                                                   |  |