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

FORM 10-K

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008

or

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

For the transition period from _____ to _____

Commission File No. 000-52583

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

|                                |  |                    
|------------------------------- |  | -------------------
|Delaware                        |  | 20-5464059         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|incorporation or organization)  |  | Identification No.)

947 Linwood Avenue, Ridgewood, NJ 07450
(Address of principal executive offices) (Zip code)

(800) 942-5550
(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 o   No 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 o   No 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 x   No 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

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

| |                                                |  |   |                            |  |  
| | ---------------------------------------------- |  | - | -------------------------- |  | -
| | Large
 accelerated filer                       |  | o | Accelerated
 filer         |  | o
| | Non-accelerated
 filer                         |  | o | Smaller
 reporting company |  | x
| | (Do not
 check if a smaller reporting company) |  |   |                            |  |  

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Act). Yes o   No x


There is no
market for the shares of LLC Membership Interest in the Fund. As of March 4,
2009 there are 486.4825 Shares outstanding.

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RIDGEWOOD ENERGY U FUND, LLC
2008 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

|         |  |         |  |                                                                                                                 |  |     
|-------- |  | ------- |  | --------------------------------------------------------------------------------------------------------------- |  | ----
|         |  |         |  |                                                                                                                 |  | PAGE
|         |  |         |  |                                                                                                                 |  |     
|PART I   |  |         |  |                                                                                                                 |  |     
|         |  | ITEM 1  |  | BUSINESS                                                                                                        |  | 4   
|         |  | ITEM 1A |  | RISK
 FACTORS                                                                                                   |  | 11  
|         |  | ITEM 1B |  | UNRESOLVED
 STAFF COMMENTS                                                                                      |  | 11  
|         |  | ITEM 2  |  | PROPERTIES                                                                                                      |  | 11  
|         |  | ITEM 3  |  | LEGAL
 PROCEEDINGS                                                                                              |  | 11  
|         |  | ITEM 4  |  | SUBMISSION
 OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                            |  | 12  
|PART II  |  |         |  |                                                                                                                 |  |     
|         |  | ITEM 5  |  | MARKET FOR
 REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER  MATTERS AND ISSUER PURCHASES
 OF EQUITY SECURITIES |  | 12  
|         |  | ITEM 6  |  | SELECTED
 FINANCIAL DATA                                                                                        |  | 12  
|         |  | ITEM 7  |  | MANAGEMENTS
 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                          |  | 12  
|         |  | ITEM 7A |  | QUANTITATIVE
 AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                     |  | 17  
|         |  | ITEM 8  |  | FINANCIAL
 STATEMENTS AND SUPPLEMENTARY DATA                                                                    |  | 17  
|         |  | ITEM 9  |  | CHANGES IN
 AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                           |  | 17  
|         |  | ITEM 9A |  | CONTROLS
 AND PROCEDURES                                                                                        |  | 18  
|         |  | ITEM 9B |  | OTHER
 INFORMATION                                                                                              |  | 18  
|PART III |  |         |  |                                                                                                                 |  |     
|         |  | ITEM 10 |  | DIRECTORS,
 EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                         |  | 19  
|         |  | ITEM 11 |  | EXECUTIVE
 COMPENSATION                                                                                         |  | 20  
|         |  | ITEM 12 |  | SECURITY
 OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
 MATTERS                |  | 20  
|         |  | ITEM 13 |  | CERTAIN
 RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                      |  | 21  
|         |  | ITEM 14 |  | PRINCIPAL
 ACCOUNTING FEES AND SERVICES                                                                         |  | 22  
|PART IV  |  |         |  |                                                                                                                 |  |     
|         |  | ITEM 15 |  | EXHIBITS,
 FINANCIAL STATEMENT SCHEDULES                                                                        |  | 22  

2

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FORWARD-LOOKING STATEMENTS

Certain
statements in this Annual Report on Form 10-K (Annual Report) and the
documents Ridgewood Energy U Fund, LLC (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 based on current expectations and assumptions that are subject to
risks and uncertainties that may cause actual results to differ materially from
the forward-looking statements. These forward-looking statements generally are
identified by the words believe, project, expect, anticipate,
estimate, intend, strategy, plan, target, pursue, may, will
likely result, and similar expressions. Examples of such events that could
cause actual results to differ materially from historical results or those
anticipated include weather conditions, such as hurricanes, changes in market
conditions affecting the pricing of oil and natural gas, the cost and
availability of equipment, and changes in governmental regulations. 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,
except as required by law.

WHERE YOU CAN GET MORE INFORMATION

The Fund will
file annual, quarterly and current reports and certain other information with
the Securities Exchange Commission (SEC). Persons may read and copy any
materials the Fund files with the SEC at the SECs public reference room at 100
F Street, NE, Washington D.C. 20549, on official business days during the hours
of 10 a.m. to 3 p.m. Eastern Time. Information may be obtained from 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.

3

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PART I

ITEM 1. BUSINESS

Overview

The Fund (an
exploratory stage enterprise) is a Delaware limited liability company (LLC)
formed on August 28, 2006 to acquire interests primarily in oil and natural gas
properties located in the United States waters of Texas, Louisiana, and Alabama
in the Gulf of Mexico.

The Fund
initiated its private placement offering on October 1, 2006, selling whole and
fractional shares of LLC membership interest (Shares), primarily at $150
thousand per whole share. There is no public market for the Shares and one is
not likely to develop. In addition, the Shares are subject to material
restrictions on transfer and resale and cannot be transferred or resold except
in accordance with the Funds limited liability company agreement (the LLC
Agreement) and applicable federal and state securities laws. The private
placement offering was terminated on January 19, 2007. The Fund raised $72.4
million, and after payment of $11.8 million in offering fees, commissions and
investment fees, the Fund had $60.6 million for investments and operating
expenses. See Item 13. Certain Relationships and Related Transactions, and
Director Independence for additional discussion.

Manager

Ridgewood
Energy Corporation (the Manager) or (Ridgewood Energy) was founded in 1982
by Robert E. Swanson. The Manager has direct and exclusive control over the
management of the Funds operations. With respect to project investment, the
Manager locates potential projects, conducts appropriate due diligence and
negotiates and completes the transactions in which the investments are made.
This includes review of existing title documents, reserve information, and
other technical specifications regarding a project, and review and preparation
of participation agreements and other agreements relating to an investment.

The Manager
performs, or arranges for the performance of, the management, advisory and
administrative services required for Fund operations. Such services include,
without limitation, the administration of shareholder accounts, shareholder
relations 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 unaffiliated
custodians, depositories, accountants, attorneys, broker-dealers, corporate
fiduciaries, insurers, banks and others as required.

The Fund is
required to pay all other expenses it may incur, including insurance premiums,
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.
The Fund is required to reimburse the Manager for all such expenses paid on its
behalf.

As
compensation for their services, the Manager is entitled to an annual
management fee, payable monthly, equal to 2.5% of the total capital
contributions made by the Funds shareholders, net of cumulative dry-hole and related
well costs incurred by the Fund. Management fees for the years ended December
31, 2008 and 2007, and for the period August 28, 2006 (Inception) through
December 31, 2008, were $1.4 million, $1.5 million, and $3.2 million,
respectively, Additionally, the Manager is entitled to receive a 15% interest
in cash distributions made by the Fund. No distributions have been paid by the
Fund since its inception.

Business Strategy

The Funds
primary investment objective is to generate cash for distribution to the Funds
shareholders through the acquisition of working interests in the exploration,
production and sale of oil and natural gas. Distributions 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. A working interest is a percentage of ownership in an oil
and natural gas lease granting its owner the right to explore, drill and
produce oil and natural gas from projects on that lease block. The Fund tries
to focus on projects that have significant reserve potential and 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. Working interest owners are obligated to pay a corresponding
percentage of the cost of leasing, drilling, producing and operating a well.
After royalties are paid, the working interest also entitles its owner to share
in production revenues with other working interest owners, based on the
percentage of working interest owned.

4

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By virtue of
its acquisition of working interests in various leases, the Fund invests and
participates in exploration and production of oil and natural gas projects in
leases located in the waters of the Gulf of Mexico 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 working interests 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 the working
interest. These investments may require the Fund to pay a disproportionate part
of the drilling costs on the exploratory well of a project than its working
interest would otherwise require. This is called a promote, which 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
invests 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.

For potential
project investments, the Manager reviews reserve analyses provided by the operators.
The Manager employs individuals in its Houston, Texas office that can perform
significant analysis of the operators information. However, if necessary, the
Fund may retain independent engineers to review the operators reserve analysis
and/or conduct an independent review. For producing properties, the Manager
engages independent petroleum engineers to examine and provide reserve
estimates on the Funds behalf.

Once the
Manager determines that a particular project (i.e., working interest in a lease
block) is an appropriate investment for the Fund, the Manager enters into a
participation agreement and a joint operating agreement with the other working
interest owners in a lease. Pursuant to the participation agreements and
operating agreements, proposals and decisions are made based on percentage
ownership approvals.

The Manager,
on behalf of the Fund, and other working interest owners retain the right to
make proposals involving certain operational matters associated with a project.
This limits the operators inclination to act on its own or against the
interests of the other working interest owners of the project. In accordance
with the Managers working interest, the Manager reviews, discusses and
consents to the details of the drilling plan, monitors progress under such
plan, contributes ideas to the design of and budget for production facilities
and then monitors the construction of those facilities. In addition, the
Manager retains the right to review and audit the operators financial records related
to the project to ensure the project is executed according to budget. Once a
well is in production, the Manager continually monitors, evaluates and
discusses the well production rate with the operator.

Managers Investment Committee and Investment
Criteria

The Manager
maintains an investment committee, consisting of six members, which provides
operational, scientific and technical oil and natural gas expertise to the
Fund. Five members of the investment committee are based out of the Managers
Ridgewood, New Jersey office and one member of the investment committee is
based out of the Managers Houston, Texas office. In considering projects, the
investment committee and other members of the investment team evaluate
each 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 (i) targeting
projects that have or are expected to have operators with significant resources
and experience in oil and natural gas exploration; (ii) targeting projects that
have or are expected to have partners that also have significant resources and
experience in oil and natural 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 natural 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;
(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.

5

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Properties

The Fund owns
working interests and has participated in the drilling of ten wells; three are
currently drilling, two have been determined to be successful, and five have
been determined to be dry holes.

|                                       |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|-------------------------------------- |  | -------- | - | -------- |  | ----------- |  | ------ | --------- | -------------- | ------ | ------------------------------------ |  | - | ----- |  | - | ------ | 
|                                       |  |          |   |          |  | Off-shore   |  |        |           |                |        | Total Spent ThroughDecember 31, 2008 | 
|                                       |  |          |   |          |  | Location in |  |        |           |                |        |                                     
|                                       |  | Working  |   |          |  | Gulf of     |  | Target |           | Drilling Risk  |        |                                     
|Lease
 Block                           |  | Interest |   | Operator |  | Mexico      |  | Depth  |           | (b)            |        |                                     
|                                       |  |          |   |          |  |             |  |        |           |                |        |                                      | 
|                                       |  |          |   |          |  |             |  | (feet) |           | (in thousands) |       
|Currently
 Drilling                    |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|Aspen Project                          |  | 1.5      | % |          |  | Newfield    |  |        | Louisiana |                | 22,000 |                                      |  | $ | 2,775 |  | $ |       | 
|Ajax Project                           |  | 5.0      | % |          |  | Newfield    |  |        | Louisiana |                | 9,400  |                                      |  | $ | 1,034 |  | $ | 297    | 
|Neptune Project                        |  | 6.0      | % |          |  | Newfield    |  |        | Louisiana |                | 17,300 |                                      |  | $ | 2,720 |  | $ | 1,602  | 
|                                       |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|Successful
 projects                   |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|Cobalt Project                         |  | 5.0      | % |          |  | Newfield    |  |        | Louisiana |                | 17,000 |                                      |  |   | N/A   |  | $ | 1,252  | 
|Emerald Project                        |  | 5.0      | % |          |  | LLOG        |  |        | Texas     |                | 17,000 |                                      |  |   | N/A   |  | $ | 3,017  | 
|                                       |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|Dry holes
 (Date determined dry) (a)   |  |          |   |          |  |             |  |        |           |                |        |                                      |  |   |       |  |   |        | 
|Bison Project (January 2009)           |  | 4.0      | % |          |  | LLOG        |  |        | Texas     |                | 10,500 |                                      |  |   | N/A   |  | $ | 287    | 
|Eos Project (November 2008)            |  | 4.0      | % |          |  | Mariner     |  |        | Louisiana |                | 17,400 |                                      |  |   | N/A   |  | $ | 3,296  | 
|Walker Ridge 155 (June 2008)           |  | 3.5      | % |          |  | Anadarko    |  |        | Louisiana |                | 32,000 |                                      |  |   | N/A   |  | $ | 7,818  | 
|Eugene Island 255/256 (May 2007)       |  | 15.0     | % |          |  | Helis       |  |        | Louisiana |                | 11,500 |                                      |  |   | N/A   |  | $ | 1,419  | 
|South Timbalier 135/136 (January 2007) |  | 15.0     | % |          |  | Chevron     |  |        | Louisiana |                | 20,100 |                                      |  |   | N/A   |  | $ | 10,271 | 

|    |                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Dry-hole costs represent
 costs incurred for wells that have been drilled but do not have commercially
 productive quantities of oil and/or natural gas reservoirs and have been
 plugged and abandoned.
|    |                                                                                                                                                                                                         
|(b) | Drilling
 risk represents the prospective estimated dry-hole, leasehold and sunk costs,
 as applicable.                                                                                                 

Currently Drilling

Aspen
Project


In July 2008,
the Fund acquired a 1.5% working interest in the Aspen Project, an exploratory
well, from Newfield Exploration Company (Newfield), the operator. The Aspen
Project began drilling in February 2009 and results are expected during the
second quarter of 2009. The total estimated budget for this project is $13.5
million. At December 31, 2008, the Fund had not incurred costs related to this
well.


Ajax
ProjectIn December
2008, the Fund acquired a 5.0% working interest in the Ajax Project, an
exploratory well, from Newfield, the operator. The Ajax Project began drilling
in January 2009 and results are expected in March 2009. Through December 31,
2008, the Fund has spent $0.3 million related to this well, for which the total
estimated budget is $6.4 million.

Neptune
Project


In July 2008, the Fund acquired a 6.0% working interest in the Neptune
Project, an exploratory well, from Newfield, the operator. The Neptune Project
began drilling in December 2008 and results are expected in April 2009. Through
December 31, 2008, the Fund has spent $1.6 million related to this well, for
which the total estimated budget is $4.4 million.


6

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Successful Projects

Cobalt
Project


In August
2008, the Fund acquired a 5.0% working interest in the Cobalt Project, an
exploratory well, from Newfield, the operator. The Cobalt Project was
determined to be a commercial success in January 2009 and completion efforts
are ongoing. The well is expected to commence production in May 2009. Through
December 31, 2008, the Fund has spent $1.3 million related to this well, for
which the total estimated budget is $2.4 million.


Emerald
ProjectIn March 2008,
the Fund acquired a 5.0% working interest in the Emerald Project, from LLOG
Exploration Offshore, Inc. (LLOG), the operator. The Emerald project was
determined to be a commercial success in May 2008 and has been completed. LLOG
is currently constructing facilities and related infrastructure and production
commenced in February 2009. Through December 31, 2008, the Fund has spent $3.0
million related to this project, for which the total estimated budget is $5.3
million, which includes the drilling of two additional wells.

Dry Holes

Bison ProjectIn November 2008, the Fund acquired a 4.0% working interest in the
Bison Project, an exploratory well operated by LLOG, which is located in the
Galveston region of the Gulf of Mexico. The Bison Project began drilling in
December 2008 and was determined to be an unsuccessful well, or dry hole, in
January 2009. For the year ended December 31, 2008, dry-hole
costs incurred related to this well, including plug and abandonment expenses,
were $0.3 million. Additional dry-hole costs of $0.1 million were incurred
during the first quarter of 2009.

Eos
ProjectIn August 2008, the Fund acquired a 4.0% working interest in the Eos
Project, an exploratory well, from Mariner Energy (Mariner), the operator.
The Eos Project, located in the Garden Banks region of the Gulf of Mexico,
began drilling in August 2008 and was determined to be an unsuccessful well, or
dry hole, in November 2008. For the year ended December 31, 2008, dry-hole
costs incurred related to this well, including plug and abandonment expenses,
were $3.3 million.

Walker
Ridge 155In 2007 the
Fund acquired a 3.5% working interest in the exploratory well Walker Ridge 155
from Kerr-McGee Oil & Gas Corporation (Kerr McGee), a wholly owned
subsidiary of Anadarko Petroleum Corporation (Anadarko), the operator of the
project. Drilling for Walker Ridge 155, a deepwater project began in mid-August
2007.

On June 3,
2008, the Fund was informed by Anadarko that based upon its evaluation of the
three-dimensional data surrounding the Walker Ridge 155 lease block, they have
elected not to continue drilling this well. The well has been determined to be
an unsuccessful well, or a dry hole. For the year ended December 31, 2008,
dry-hole costs incurred related to this well, including plug and abandonment
expenses, were $7.8 million.

Eugene
Island 255/256In 2007, the Fund acquired a 15.0% working interest in Eugene Island
255/256, an exploratory well, from Helis Oil & Gas Company,
L.L.C. (Helis), the operator. In
May 2007 the operator informed the Fund that Eugene Island 255/256 did not have
commercially productive quantities of either oil or gas and had been determined
to be an unsuccessful well, or dry hole. Dry-hole costs incurred related to
this well, including plug and abandonment expenses, were $1.4 million.

South
Timbalier 135/136In 2006, the Fund acquired a 15.0% working interest in South Timbalier
135/136, an exploratory well, from Chevron U.S.A., Inc.
(Chevron), the operator. In
January 2007 the operator informed the Fund that South Timbalier 135/136 did
not have commercially productive quantities of either oil or gas and had been
determined to be an unsuccessful well, or dry hole. Dry-hole costs incurred
related to this well, including plug and abandonment expenses, were $10.3
million.

Working Interest in Oil and 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. See
further discussion under the heading Regulation in this Item 1. Business.

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.

7

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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 and 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 natural gas lease under the OCSLA pay a 16.67%
or 18.75% royalty to the MMS for shallow-water projects, dependent upon lease
date, and a 12.5% royalty to the MMS for deepwater projects. Therefore, the net
revenue interest of the holders of 100% of the working interest in the projects
in which the Fund will invest is between 81.25% and 83.33% of the total revenue
for shallow-water projects and 87.5% of the total revenue for deepwater
projects, and, such net revenue amount is further reduced by any other royalty
burdens that apply to a lease block.

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 that it is likely that
oil and natural gas from the Funds current and future projects will have
access to pipeline transportation and can be marketed accordingly.

Operator

The projects
in which the Fund has invested are operated and controlled by unaffiliated
third-party entities acting as operators. The operators are responsible for
drilling, administration and production activities for leases jointly owned by
working interest owners and act on behalf of all working interest owners under
the terms of the applicable operating agreement. 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 ongoing projects are operated by
Newfield and LLOG.

Because the
Fund does not operate any of the projects in which it has acquired an interest,
shareholders 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 its projects, as well as general
liability and similar coverage for its business operations. However, there is
no assurance that such insurance will be adequate to protect the Fund from
material losses related to the projects. In addition, the Managers past
practice has been to obtain insurance as a package that is intended to cover
most, if not all, of the funds under its management. While the Manager believes
it has obtained adequate insurance in accordance with customary industry
practices, the possibility exists, depending on the extent of the incident,
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 be exhausted and become insufficient to
cover a claim made by the Fund in a given 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, cash to help provide for the Funds proportionate share of the
cost of dismantling and removing production platforms and facilities and
plugging and abandoning the projects, 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 $1.0
million from capital contributions into a salvage fund, which, along with
interest earned on this account, the Fund estimates to be sufficient to meet
the Funds potential requirements. If the Manager determines the salvage fund
will not be sufficient to cover the Funds proportionate share of expense, the
Fund may transfer amounts from operating income to fund the deficit. 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 or use of the salvage fund.

8

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Seasonality

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

However, the
Funds drilling, production and transportation operations are subject to seasonal
risks, such as hurricanes, that may affect the Funds ability to bring such oil
or natural gas to the market and, consequently, affect the price for such oil
and natural gas. The National Hurricane Center defines hurricane season in the
Gulf of Mexico as June 1st through November 30th. 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 and price of repair equipment. As a
result, these factors may affect the supply and, consequently, the price of oil
and natural gas. 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 effect of
hurricanes on operations can range from no damage and little or no
interruptions in operations to significant damage with extended interruptions
in operations. As such, it is impossible to predict what impact, if any, a
hurricane may have on the Funds projects. During September 2008, hurricane
activity in the Gulf of Mexico did not cause material damage to any of the
Funds properties, however; the Fund did experience a brief drilling
interruption relative to its Eos Project.

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 upon which it depends for more than ten percent (10%)
of the Funds revenue.

Energy Prices

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 that the Fund cannot control or influence. 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. The Fund has not engaged in any price risk management
programs or hedges to date.

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 lease acquisitions 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,
and 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 the shallow waters in 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.

9

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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. In addition, the
Manager also maintains leases for other offices that are used for
administrative purposes.

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 US 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 the Fund, 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.

10

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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 of 1990, as amended (the OPA), amends Section 311 of the
Federal Water Pollution Control Act of 1972 (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 operators are
responsible for such compliance. However, notwithstanding the operators
responsibility for compliance, in the event of an oil spill, the Fund, along
with the operators and other working interest owners, could be liable under the
OPA for the resulting environmental damage.

Clean Water Act. Generally, the Clean Water Act imposes
liability for the unauthorized discharge of pollutants including 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. 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 of 1970, as amended (the 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 of 1976, as amended, 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
thereunder. The Fund does not believe
that the costs of complying with environmental laws, including federal, state
and local laws will have a material adverse impact on its financial condition
and/or operations.

ITEM 1A. RISK FACTORS

Not required.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not
applicable.

ITEM 2. PROPERTIES

The
information regarding the Funds properties that is contained in Item 1.
Business under the heading Properties of this Annual Report is incorporated
herein by reference.

ITEM 3. LEGAL PROCEEDINGS

None.

11

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

None.

PART II

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

There is
currently no established public trading market for the Shares. As of the date of this filing, there were
approximately 930 shareholders of record of the Fund.

Distributions
are made in accordance with the provisions of the LLC Agreement. At various times throughout the year, the
Fund determines whether there is sufficient available cash, as defined in the
LLC Agreement, for distribution to shareholders. There is, however, no requirement to distribute available cash
and as such, available cash is distributed to the extent and at such times as
the Manager believes is advisable. To
date, the Fund has not declared or paid distributions.

ITEM 6. SELECTED FINANCIAL DATA

Not required.

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) was organized to acquire interests in oil and
natural gas properties located in the United States offshore waters of Texas,
Louisiana and Alabama in the Gulf of Mexico.
The Funds primary investment objective is to generate cash flow for
distribution to the Funds shareholders through participation in oil and
natural gas exploration and development projects in the Gulf of Mexico. Distributions 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 the Funds
operations.

The Manager
performs certain duties on the Funds behalf including the evaluation of
potential projects for investment and ongoing management, 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. See also Item 1.
Business for additional information regarding the projects of the Fund.

Once the
Funds properties begin production, revenues will be subject to the markets for
crude oil and natural gas, which have been extremely volatile, and are likely
to continue to be volatile in the future. This volatility is caused by numerous
factors and market conditions that the Fund cannot control or influence.
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.

Subsequent Events

Bison ProjectIn November
2008, the Fund acquired a 4.0% working interest in the Bison Project, an
exploratory well, from LLOG, the operator.
The Bison Project, located in the Galveston region of the Gulf of
Mexico, began drilling in December 2008 and was determined to be an
unsuccessful well, or dry hole, in January 2009. For the year ended December 31, 2008, dry-hole costs related to
this well, including plug and abandonment expenses, were $0.3 million. Additional dry-hole costs of $0.1 million
were incurred during the first quarter 2009.

Critical Accounting EstimatesThe discussion
and analysis of the Funds financial condition and results of operations are
based upon the Funds financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United States
of America (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 its 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 actual results may differ from these estimates and
assumptions and such differences may have a material impact on the results of
operations, financial position or cash flows.
See Note 2 of Notes to the Financial Statements  Summary of
Significant Accounting Policies in Item 8. Financial Statements and
Supplementary Data contained in this Annual Report for a discussion of the
Funds significant accounting policies.

12

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Accounting for
Exploration and Development Costs

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

The costs of
exploratory and developmental wells are capitalized pending determination of
whether proved reserves have been found. 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 as dry-hole costs.
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.

Unproved Property

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

Proved Reserves

Upon
production of the Funds oil and natural gas properties, the Fund will engage
an independent petroleum engineer to perform a comprehensive study of the
Funds producing properties and dependent upon the timing of discoveries
certain successful properties to determine the quantities of reserves and the
period over which such reserves will be recoverable. The Funds estimates of
proved reserves are based on the quantities of oil and natural gas 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 and
future net revenue to change. 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.

Asset Retirement
Obligations

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

Impairment of
Long-Lived Assets

The Fund
reviews long-lived assets, including oil and natural gas properties, 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 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 natural gas properties, the present value of future net cash flows is
based on the Manager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 natural 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. Fair value
determinations require considerable judgment and are sensitive to changes in
the factors described above, thus impairments could occur in future periods.

13

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Results of Operations

The following
table summarizes the Funds results of operations for the years ended December
31, 2008 and 2007, and for the period August 28, 2006 (Inception) through
December 31, 2008 and should be read in conjunction with the Funds financial
statements and the notes thereto included in Item 8. Financial Statements and
Supplementary Data in this Annual Report.

|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|---------------------------------------- |  | ----------------------- | ------- | ----------------------------------------------------------------------- | - | ------ | - | - | ------- | -
|                                         |  |                         |         | For the period
 August 28, 2006
 (Inception) through
 December 31, 2008 |  
|                                         |  |                         |         |                                                                        
|                                         |  |                         |         |                                                                        
|                                         |  | Year ended December 31, |         |                                                                        
|                                         |  | 2008                    |         | 2007                                                                    |   |       
|                                         |  |                         |         |                                                                         |   |        |  
|                                         |  | (in thousands)          |        
|Revenue                                  |  |                         |         |                                                                         |   |        |   |   |         |  
|Oil and gas revenue                      |  | $                       |        |                                                                         | $ |       |   | $ |        |  
|                                        
|Expenses                                 |  |                         |         |                                                                         |   |        |   |   |         |  
|Dry-hole costs                           |  |                         | 11,378  |                                                                         |   | 3,964  |   |   | 23,091  |  
|Investment fees to affiliate             |  |                         |        |                                                                         |   | 20     |   |   | 3,272   |  
|Management fees to affiliate             |  |                         | 1,418   |                                                                         |   | 1,534  |   |   | 3,205   |  
|Operating expenses                       |  |                         | 94      |                                                                         |   |       |   |   | 94      |  
|General and administrative expenses      |  |                         | 452     |                                                                         |   | 453    |   |   | 1,233   |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|Total expenses                           |  |                         | 13,342  |                                                                         |   | 5,971  |   |   | 30,895  |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|Loss from operations                     |  |                         | (13,342 | )                                                                       |   | (5,971 | ) |   | (30,895 | )
|Other income                             |  |                         |         |                                                                         |   |        |   |   |         |  
|Interest income                          |  |                         | 939     |                                                                         |   | 2,174  |   |   | 3,348   |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|Net loss                                 |  |                         | (12,403 | )                                                                       |   | (3,797 | ) |   | (27,547 | )
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|Other comprehensive income               |  |                         |         |                                                                         |   |        |   |   |         |  
|Unrealized gain on marketable securities |  |                         | 370     |                                                                         |   | 16     |   |   | 386     |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  
|Total comprehensive loss                 |  | $                       | (12,033 | )                                                                       | $ | (3,781 | ) | $ | (27,161 | )
|                                         |  |                         |         |                                                                         |   |        |   |   |         |  

Year ended December
31, 2008 compared to year ended December 31, 2007 and the period August 28,
2006 (Inception) through December 31, 2008

Oil and Gas Revenue.From inception of the Fund in August
2006 through December 31, 2008, the Fund has not earned oil and gas revenue and
is considered an exploratory stage enterprise.

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. During the year ended
December 31, 2008, certain wells received credits from their respective
operators upon review and audit of the wells costs. The following table summarizes dry-hole costs inclusive of plug
and abandonment costs and credits.

14

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|                      |  |                         |        |                                                                         |   |       |  |   |        | 
|--------------------- |  | ----------------------- | ------ | ----------------------------------------------------------------------- | - | ----- |  | - | ------ | 
|                      |  |                         |        | For the period
 August 28, 2006
 (Inception) through
 December 31, 2008 |  
|                      |  |                         |        |                                                                        
|                      |  |                         |        |                                                                        
|                      |  | Year ended December 31, |        |                                                                        
|Lease Block           |  | 2008                    |        | 2007                                                                    |   |      
|                      |  |                         |        |                                                                         |   |       | 
|                      |  | (in thousands)          |       
|                     
|South Timbalier 135   |  | $                       | (24    | )                                                                       | $ | 2,546 |  | $ | 10,271 | 
|Walker Ridge 155      |  |                         | 7,818  |                                                                         |   |      |  |   | 7,818  | 
|Eos Project           |  |                         | 3,296  |                                                                         |   |      |  |   | 3,296  | 
|Eugene Island 255/256 |  |                         | 1      |                                                                         |   | 1,418 |  |   | 1,419  | 
|Bison Project         |  |                         | 287    |                                                                         |   |      |  |   | 287    | 
|                      |  |                         |        |                                                                         |   |       |  |   |        | 
|                      |  | $                       | 11,378 |                                                                         | $ | 3,964 |  | $ | 23,091 | 
|                      |  |                         |        |                                                                         |   |       |  |   |        | 

Investment Fees to
Affiliate.
Investment fees for the year ended December 31, 2007, and for the period
August 28, 2006 (Inception) through December 31, 2008, were $20 thousand and
$3.3 million, respectively. There were
no investment fees for the year ended December 31, 2008. Investment fees consist of a one-time fee
paid to the Manager for the service of investigating and evaluating investment
opportunities and effecting transactions.

Management Fees to
Affiliate.
Management fees for the years ended December 31, 2008 and 2007, and for
the period August 28, 2006 (Inception) through December 31, 2008, were $1.4
million, $1.5 million, and $3.2 million, respectively, representing 2.5% of the
total capital contributions, net of cumulative dry-hole and related well costs
incurred by the Fund. See additional discussion in Item 1. Business.

Operating Expenses. Operating expenses represent geological
costs, principally related to the Emerald, Ajax and Eos projects, and accretion
expense as detailed in the table below.

|                   |  |                         |    |                                                                         |   |   |  |   |    | 
|------------------ |  | ----------------------- | -- | ----------------------------------------------------------------------- | - | - |  | - | -- | 
|                   |  |                         |    | For the period
 August 28, 2006
 (Inception) through
 December 31, 2008 |  
|                   |  |                         |    |                                                                        
|                   |  |                         |    |                                                                        
|                   |  | Year ended December 31, |    |                                                                        
|                   |  | 2008                    |    | 2007                                                                    |   |  
|                   |  |                         |    |                                                                         |   |   | 
|                   |  | (in thousands)          |   
|Geological
 costs  |  | $                       | 93 |                                                                         | $ |  |  | $ | 93 | 
|Accretion
 expense |  |                         | 1  |                                                                         |   |  |  |   | 1  | 
|                   |  |                         |    |                                                                         |   |   |  |   |    | 
|                   |  | $                       | 94 |                                                                         | $ |  |  | $ | 94 | 
|                   |  |                         |    |                                                                         |   |   |  |   |    | 

General and
Administrative Expenses. General and
administrative expenses represent costs specifically identifiable or allocable
to the Fund, as detailed in the table below.

|                     |  |                         |     |                                                                         |   |     |  |   |       | 
|-------------------- |  | ----------------------- | --- | ----------------------------------------------------------------------- | - | --- |  | - | ----- | 
|                     |  |                         |     | For the period
 August 28, 2006
 (Inception) through
 December 31, 2008 |  
|                     |  |                         |     |                                                                        
|                     |  |                         |     |                                                                        
|                     |  | Year ended December 31, |     |                                                                        
|                     |  | 2008                    |     | 2007                                                                    |   |    
|                     |  |                         |     |                                                                         |   |     | 
|                     |  | (in thousands)          |    
|Accounting fees      |  | $                       | 193 |                                                                         | $ | 137 |  | $ | 410   | 
|Insurance expense    |  |                         | 181 |                                                                         |   | 274 |  |   | 697   | 
|Trust fees and other |  |                         | 78  |                                                                         |   | 42  |  |   | 126   | 
|                     |  |                         |     |                                                                         |   |     |  |   |       | 
|                     |  | $                       | 452 |                                                                         | $ | 453 |  | $ | 1,233 | 
|                     |  |                         |     |                                                                         |   |     |  |   |       | 

Accounting
fees represent annual audit and tax preparation fees, quarterly reviews and
filing fees incurred by the Fund.
Insurance expense represents premiums related to well control insurance,
which varies dependent upon the number of wells drilling, and directors and
officers liability policy. Trust fees
represent bank fees associated with the management of the Funds cash accounts.

Interest Income.Interest
income is comprised of interest earned on cash and cash equivalents and
investments in U.S. Treasury securities.
Interest income for the years ended December 31, 2008 and 2007, and for
the period August 28, 2006 (Inception) through December 31, 2008, were $0.9
million, $2.2 million, and $3.3 million, respectively. The decrease was attributable to a reduction
in average outstanding balances earning interest due to ongoing capital
expenditures coupled with lower interest rates earned.

15

---



Unrealized Gain on
Marketable Securities.During
2007, the Fund purchased long-term available-for-sale U.S. Treasury securities,
which mature in December 2009.
Unrealized gains and losses related to the securities change in fair
value are recorded in other comprehensive income until realized. The Fund recorded an unrealized gain of $0.4
million, $16 thousand, and $0.4 million for the years ended December 31, 2008
and 2007, and for the period August 28, 2006 (Inception) through December 31,
2008, respectively.

Capital Resources and Liquidity

Operating Cash FlowsCash flows
used in operating activities for the year ended December 31, 2008 were $1.2
million, primarily related to the payment of management fees of $1.4 million,
general and administrative expenses of $0.5 million, and operating expenses of $0.1
million, partially offset by interest income received of $0.8 million.

Cash flows
used in operating activities for the year ended December 31, 2007 were $0.3
million, primarily related to the payment of investment fees of $0.4 million,
management fees of $1.5 million, general and administrative expenses of $0.5
million, and an unfavorable working capital of $0.1 million, partially offset
by interest income received of $2.2 million.

Cash flows
used in operating activities for the period August 28, 2006 (Inception) through
December 31, 2008 were $4.7 million, primarily related to the payment of
investment fees of $3.3 million, management fees of $3.2 million, general and
administrative expenses of $1.2 million, and operating expenses of $0.1 million,
partially offset by interest income received of $3.1 million.

Investing Cash FlowsCash flows
provided by investing activities for the year ended December 31, 2008 were $3.5
million, related to proceeds from the sale of U.S. treasury securities totaling
$24.5 million. These amounts were
partially offset by investments in held-to-maturity U.S. treasury securities of
$12.2 million and capital expenditures for oil and gas properties of $8.8
million, inclusive of advances.
Additionally, during the year ended December 31, 2008, the Fund
increased its salvage fund investments by $31 thousand, which consisted of
interest earned on this account.

Cash flows
used in investing activities for the year ended December 31, 2007 were $47.0
million, related to investments in held-to-maturity U.S. treasury securities,
available-for-sale U.S. treasury securities, and the salvage fund of $12.0
million, $14.7 million, and $1.0 million, respectively, and capital
expenditures for oil and gas properties of $19.2 million. Additionally, during the year ended December
31, 2007, the Fund increased its salvage fund investment by $33 thousand, which
consisted of interest earned on this account.

Cash flows
used in investing activities for the period August 28, 2006 (Inception) through
December 31, 2008 were $43.5 million, related to investments in
held-to-maturity U.S. treasury securities, available-for-sale U.S. treasury
securities, and the salvage fund of $24.2 million, $14.7 million, and $1.0
million, respectively, and capital expenditures of oil and gas properties
of $28.0 million, inclusive of
advances. Additionally, during the
period August 28, 2006 (Inception) through December 31, 2008, the Fund
increased its salvage fund investments by $64 thousand, which consisted of interest
earned on this account. These amounts
were partially offset by proceeds from the sale of U.S. Treasury securities
totaling $24.5 million.

Financing Cash FlowsCash flows
provided by financing activities for the year ended December 31, 2008 were $22
thousand, related to capital contributions received of $23 thousand, partially
offset by syndication cost payments of $1 thousand.

Cash flows
provided by financing activities for the year ended December 31, 2007 were $2.2
million, related to capital contributions received totaling $3.3 million,
partially offset by syndication cost payments of $1.1 million.

Cash flows
provided by financing activities for the period from August 28, 2006
(Inception) through December 31, 2008 were $63.8 million, related to capital
contributions received totaling $72.4 million, partially offset by syndication
cost payments of $8.5 million.

Estimated Capital Expenditures

The Fund has
entered into multiple 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, 2008, the Fund had committed to
spend an additional $25.8 million related to its investment properties.

16

---



When the
Manager makes a decision to participate 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 and infrastructure
anticipated. 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.

Capital
expenditures for investment properties are funded with the capital raised by
the Fund in its private placement, which is more than likely, all the capital
it will be able to obtain. The number of projects in which the Fund can invest
will naturally be limited, and each unsuccessful project the Fund experiences
will reduce its ability to generate revenue and exhaust its capital. Typically,
the Manager seeks an investment portfolio that combines high and low risk
exploratory projects.

Liquidity Needs

The Funds
primary short-term liquidity needs are to fund its operations, inclusive of
management fees and capital expenditures for its investment properties. Operations are funded utilizing operating
income, existing cash on-hand, short-term investments, and income earned
therefrom. The Manager is entitled to
receive an annual management fee from the Fund regardless of the Funds
profitability in that year.

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. As a result of declining interest rates and
ongoing capital expenditures, such interest and/or dividend income is currently
not expected to be sufficient to cover Fund expenses including the management
fee, thus requiring the Fund to use capital contributions to fund such
expenses. Once a well is on production, the management fee and fund expenses
are paid from operating income.

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 the Funds operations.

Off-Balance Sheet Arrangements

The Fund had
no off-balance sheet arrangements as of December 31, 2008 and 2007 and does not
anticipate the use of such arrangements in the future.

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 negotiate
any such contracts. No contractual obligations exist at December 31, 2008 and
2007 other than those discussed in Estimated Capital Expenditures above.

Recent Accounting Pronouncements

See Note 3 of
Notes to Financial Statements  Recent Accounting Standards in Item 8.
Financial Statements and Supplementary Data contained in this Annual Report
for a discussion of recent accounting pronouncements.

ITEM 7A. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.

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 Exhibits, Financial Statement
Schedules and filed as part of this report.

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

None.

17

---



ITEM 9A. CONTROLS
AND PROCEDURES

Disclosure Controls
and ProceduresUnder the
supervision and with the participation of the Chief Executive Officer and Chief
Financial Officer of the Fund, management of the Fund and the Manager carried
out an evaluation of the effectiveness of the design and operation of the
Funds disclosure controls and procedures pursuant to the Exchange Act Rule
13a-15(e) as of December 31, 2008.
Based upon the evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Funds disclosure controls and procedures
are effective as of the end of the period covered by this report.

Managements Report
on Internal Control over Financial ReportingManagement of
the Fund is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Exchange Act Rule
13a-15(f)). The Funds internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.

Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may
deteriorate.

Management of
the Fund, including its Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of the Funds internal control over financial
reporting as of December 31, 2008. In
making this assessment, management of the Fund used the criteria set forth by
the Committee of Sponsoring Organizations of the Treadway Commission (the
COSO) in Internal Control  Integrated
Framework. Based on their assessment using those criteria,
management of the Fund concluded that, as of December 31, 2008, the Funds
internal control over financial reporting is effective.

This annual
report does not include an attestation report of the Funds registered public
accounting firm regarding internal control over financial reporting. The Funds
report was not subject to attestation by the Funds registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Fund to provide only managements report in this
annual report.

Changes in Internal
Control over Financial ReportingThe Chief
Executive Officer and Chief Financial Officer of the Fund have concluded that
there have not been any changes in the Funds internal control over financial
reporting during the quarter ended December 31, 2008 that have materially
affected, or are reasonably likely to materially affect, the Funds internal
control over financial reporting.

ITEM 9B. OTHER
INFORMATION

None.

18

---



PART III

ITEM 10. DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Fund has
engaged Ridgewood Energy as the Manager. The Manager has very broad authority,
including the authority to appoint the executive officers of the Fund. Executive officers of Ridgewood Energy and
the Fund and their ages at December 31, 2008 are as follows:

|Name, Age
 and Position with Registrant   |  | Officer of
 Ridgewood Energy
 Corporation Since | 
|----------------------------------------- |  | ----------------------------------------------- | 
|                                          |  |                                                 | 
|                                         
|Robert E. Swanson, 61                     |  |                                                 | 
|President and Chief Executive Officer     |  | 1982                                            | 
|                                          |  |                                                 | 
|W. Greg Tabor, 48                         |  |                                                 | 
|Executive Vice President and              |  |                                                 | 
|Director of Business Development          |  | 2004                                            | 
|                                          |  |                                                 | 
|Robert L. Gold, 50                        |  |                                                 | 
|Executive Vice President                  |  | 1987                                            | 
|                                          |  |                                                 | 
|Kathleen P. McSherry, 43                  |  |                                                 | 
|Executive Vice President and              |  |                                                 | 
|Chief Financial Officer                   |  | 2000                                            | 
|                                          |  |                                                 | 
|Daniel V. Gulino, 48                      |  |                                                 | 
|Senior Vice President and General Counsel |  | 2003                                            | 
|                                          |  |                                                 | 
|Adrien Doherty, 56                        |  |                                                 | 
|Executive Vice President                  |  | 2006                                            | 

The officers
in the above table have also been officers of the Fund since August 28, 2006,
the date of inception of the Fund. The
officers are employed by and paid exclusively by the Manager. Set forth below are the names of, and
certain biographical information regarding the executive officers of Ridgewood
Energy and the Fund:

Robert E. Swanson
has served as the President, Chief Executive Officer, sole director, and sole
stockholder of Ridgewood Energy since its inception. Mr. Swanson is also the
controlling member of Ridgewood Renewable Power, LLC (Ridgewood Power) and
Ridgewood Capital Corporation (Ridgewood Capital), affiliates of Ridgewood
Energy. Mr. Swanson has been President and registered principal of Ridgewood
Securities Management, LLC 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.

W. 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
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 Executive 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.

19

---



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

Board of Directors and Board Committees

The Fund does
not have its own board of directors or any board committees. The Fund relies
upon the Manager to provide recommendations regarding dispositions and
financial disclosure. Officers of the
Fund are not compensated by the Fund, and all compensation matters are
addressed by the Manager, as described in Item 11. Executive Compensation of
this Annual Report. 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.

Code of Ethics

The Manager of
the Fund has adopted a code of ethics for all employees, including the
Managers principal executive officer and principal financial and accounting
officer. If any amendments are made to the code of ethics or the Manager of the
Fund grants any waiver, including any implicit waiver, from a provision of the
code to any of the Managers executive officers, the Fund will disclose the
nature of such amendment or waiver on our website or in a current report on
Form 8-K. Copies of the code of ethics
are available, without charge, on the Managers website at www.ridgewoodenergy.com
and in print upon written request to the business address of the Manager at 947
Linwood Avenue, Ridgewood, New Jersey 07450, ATTN: General Counsel.

Section 16(a) Beneficial Ownership Reporting
Compliance

Section 16(a)
of the Exchange Act, 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, 2008, 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.

ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SECURITY
HOLDERS MATTERS

The following
table sets forth information with respect to beneficial ownership of the shares
as of March 4, 2009 (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 486.4825 shares outstanding at March 4, 2009. Other than
the below, no officer or director of the Manager or the Fund owns any of the
Funds Shares.

20

---



|                                                              |  |                   |      |         |  |   | 
|------------------------------------------------------------- |  | ----------------- | ---- | ------- |  | - | 
|Name of beneficial owner                                      |  | Number
 of shares |      | Percent | 
|                                                              |  |                   |      |         | 
|                                                             
|Robert E. Swanson (1),
 President and Chief Executive Officer |  |                   | 1.00 |         |  | * | 
|Robert L. Gold (2),
 Executive Vice President                 |  |                   | 1.00 |         |  | * | 
|Executive officers as a
 group (1)(2)                         |  |                   | 2.00 |         |  | * | 

|    |                                                                                      
|--- | -------------------------------------------------------------------------------------
|*   | Represents less than one
 percent.                                                   
|    |                                                                                      
|(1) | Includes shares owned by
 Mr. Swansons family members and Trusts, which he controls.
|    |                                                                                      
|(2) | Includes shares owned by
 Mr. Golds family members.                                 

ITEM 13. CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The Fund
incurred a one-time investment fee approximately 4.5% of initial capital
contributions, payable to the Manager, for services of investigating and
evaluating investment opportunities and effecting transactions and are expensed
as incurred. For the year ended
December 31, 2007 and for the period August 28, 2006 (Inception) through
December 31, 2008, investment fees were $20 thousand and $3.3 million,
respectively. For the year ended
December 31, 2008 there were no investment fees incurred. At December 31, 2007, the Fund owed the
Manager $1 thousand related to investment fees, which is included in accrued
expenses payable. At December 31, 2008,
there were no such amounts payable.

The Fund
incurred an offering fee, payable to the Manager, totaling $3.2 million, which
approximated 3.5% of capital contributions, directly related to the offer and
sale of Shares of the Fund. Such
offering fee was included in syndication costs of $8.5 million. At December 31, 2007, $1 thousand of
offering fees were included in accrued expenses. At December 31, 2008, there were no such amounts payable.

For the period
August 28, 2006 (Inception) through December 31, 2008, Ridgewood Securities
Corporation, a registered broker-dealer affiliated with the Manager, was paid
commissions and placement fees for Shares sold of the Fund of $0.1 million and
$0.7 million, respectively, which are reflected in syndication costs.

The LLC
Agreement provides that the Manager render management, administrative and
advisory services. For such services,
the Manager is paid an annual management fee, payable monthly, of 2.5% of total
capital contributions, net of cumulative dry-hole and related well costs
incurred by the Fund. Management fees
for the years ended December 31, 2008 and 2007, and for the period August 28,
2006 (Inception) through December 31, 2008 were $1.4 million, $1.5 million, and
$3.2 million, respectively.

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

At times,
short-term payables and receivables, which do not bear interest, arise from
transactions with affiliates in the ordinary course of business. At December 31, 2008 and 2007, there were no
such amounts payable or receivable.

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.

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.

21

---



ITEM 14. PRINCIPAL
ACCOUNTING FEES AND SERVICES

The following
table presents fees and services rendered by Deloitte and Touche LLP for the
years ended December 31, 2008 and 2007.

|               |  |                         |     |      |   |     | 
|-------------- |  | ----------------------- | --- | ---- | - | --- | 
|               |  | Year ended December 31, |    
|               |  | 2008                    |     | 2007 |  
|               |  |                         |     |      |  
|               |  | (in thousands)          |    
|Audit fees (1) |  | $                       | 130 |      | $ | 125 | 

(1) Fees for audit of annual
financial statements, reviews of the related quarterly financial statements,
and reviews of documents filed with the SEC.

PART IV

ITEM 15. EXHIBITS,
FINANCIAL STATEMENT SCHEDULES

(a) (1) Financial Statements

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

(a) (2) Financial Statement Schedules

None.

22

---



|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|------- |  | ----------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | -----------------------------------------------------------------------------
|(a) (3) |  |                   |                                                                                                                                                                                                                                                            |                 
|       
|EXHIBIT |  |                   |                                                                                                                                                                                                                                                            |                 
|NUMBER  |  | TITLE OF
 EXHIBIT |                                                                                                                                                                                                                                                            | METHOD OF FILING
|        |  |                   |                                                                                                                                                                                                                                                            |                 
|       
|3.1     |  |                   | Articles of Formation of
 Ridgewood Energy U Fund, LLC dated August 28, 2006.                                                                                                                                                                              |                  | Incorporated by reference
 to the Funds Form 10 filed on April 26, 2007.    
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|3.2     |  |                   | Limited Liability Company
 Agreement between Ridgewood Energy Corporation and Investors of Ridgewood
 Energy U Fund, LLC dated October 1, 2006.                                                                                                            |                  | Incorporated by reference
 to the Funds Form 10 filed on April 26, 2007.    
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.1    |  |                   | Participation Agreement
 between LLOG Exploration Offshore, Inc. and Ridgewood Energy Corporation as
 Manager for Emerald Project.                                                                                                                         |                  | Incorporated by reference
 to the Funds Form 10-Q filed on May 14, 2008.    
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.2    |  |                   | Participation Agreement
 between Newfield Exploration Company and Ridgewood Energy Corporation as
 Manager for Neptune Project.                                                                                                                            |                  | Incorporated by reference
 to the Funds Form 10-Q filed on October 24, 2008.
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.3    |  |                   | Participation Agreement between
 LLOG Exploration Offshore, Inc., Mariner Energy, Inc., Stone Energy
 Corporation and Ridgewood Energy Corporation as Manager for Eos Project.                                                                             |                  | Incorporated by reference
 to the Funds Form 10-Q filed on October 24, 2008.
|       
|10.4    |  |                   | Participation Agreement
 between LLOG Exploration Offshore, Inc. and Ridgewood Energy Corporation as
 Manager for Bison Project.                                                                                                                           |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.5    |  |                   | Participation Agreement
 between Newfield Exploration Company and Ridgewood Energy Corporation as
 Manager for Cobalt Project.                                                                                                                             |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.6    |  |                   | Participation Agreement
 between Newfield Exploration Company and Ridgewood Energy Corporation as
 Manager for Ajax Project.                                                                                                                               |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|10.7    |  |                   | Participation Agreement
 between Newfield Exploration Company and Ridgewood Energy Corporation as
 Manager for Aspen Project.                                                                                                                              |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|31.1    |  |                   | Certification of Robert E.
 Swanson, Chief Executive Officer of the Fund, pursuant to Securities Exchange
 Act Rule 13a-14(a).                                                                                                                             |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|31.2    |  |                   | Certification of Kathleen
 P. McSherry, Chief Financial Officer of the Fund, pursuant to Securities
 Exchange Act Rule 13a-14(a).                                                                                                                          |                  | Filed herewith.                                                              
|        |  |                   |                                                                                                                                                                                                                                                            |                  |                                                                              
|32      |  |                   | Certifications pursuant to
 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley
 Act of 2002, signed by Robert E. Swanson, Chief Executive Officer of the Fund
 and Kathleen P. McSherry, Chief Financial Officer of the Fund |                  | Filed herewith.                                                              

23

---



|                                                                                                                                                                           |  |     
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|INDEX TO FINANCIAL STATEMENTS                                                                                                                                              |  | PAGE
|                                                                                                                                                                           |  |     
|Report of Independent Registered Public
 Accounting Firm                                                                                                                   |  | F-2 
|Balance Sheets as of December 31, 2008 and
 2007                                                                                                                           |  | F-3 
|Statements of Operations and Comprehensive
 Loss for the years ended December 31, 2008 and 2007, and for the period August
 28, 2006 (Inception) through December 31, 2008 |  | F-4 
|Statement of Changes in Members Capital
 for the years ended December 31, 2008 and 2007, and for the period August 28,
 2006 (Inception) through December 31, 2006        |  | F-5 
|Statements of Cash Flows for the years
 ended December 31, 2008 and 2007, and for the period August 28, 2006
 (Inception) through December 31, 2008                        |  | F-6 
|Notes to Financial Statements                                                                                                                                              |  | F-7 
|Supplementary Financial Information 
 Information about Oil and Gas Producing Activities - Unaudited                                                                      |  | F-13

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

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

We have
audited the accompanying balance sheets of Ridgewood Energy U Fund, LLC (an
exploratory stage enterprise) (the Fund) as of December 31, 2008 and 2007,
and the related statements of operations and comprehensive loss, and cash flows
for the years ended December 31, 2008 and 2007 and for the period August 28,
2006 (Inception) through December 31, 2008 and changes in members capital for
the years ended December 31, 2008 and 2007 and for the period August 28, 2006
(Inception) through December 31, 2006.
These financial statements are the responsibility of the Funds
management. Our responsibility is to
express an opinion on these financial statements based on our 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 U Fund, LLC as of December 31, 2008
and 2007, and the results of its operations and its cash flows for the years
ended December 31, 2008 and 2007 and for the period August 28, 2006 (Inception)
through December 31, 2008, in conformity with accounting principles generally
accepted in the United States of America.

|                          | 
|------------------------- | 
|/s/ Deloitte
& Touche LLP | 
|                          | 

Parsippany,
New Jersey March 4, 2009

F-2

---



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

|                                                                                  |  |                    |         |                    |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------ | ------- | ------------------ | - | ------- | -
|                                                                                  |  | December 31,
 2008 |         | December 31,
 2007 |  
|                                                                                  |  |                    |         |                    |  
|ASSETS                                                                            |  |                    |         |                    |   |         |  
|Current assets:                                                                   |  |                    |         |                    |   |         |  
|Cash and cash equivalents                                                         |  | $                  | 15,657  |                    | $ | 13,316  |  
|Short-term investment in held-to-maturity securities                              |  |                    |        |                    |   | 12,020  |  
|Short-term investment in available-for-sale securities                            |  |                    | 15,055  |                    |   |        |  
|Other current assets                                                              |  |                    | 117     |                    |   | 118     |  
|                                                                                  |  |                    |         |                    |   |         |  
|Total current assets                                                              |  |                    | 30,829  |                    |   | 25,454  |  
|                                                                                 
|Long-term investment in marketable securities                                     |  |                    |        |                    |   | 14,742  |  
|Salvage fund                                                                      |  |                    | 1,064   |                    |   | 1,033   |  
|                                                                                 
|Oil and gas properties:                                                           |  |                    |         |                    |   |         |  
|Advances to operators for working interests and expenditures                      |  |                    | 1,402   |                    |   |        |  
|Unproved properties                                                               |  |                    | 1,895   |                    |   | 7,542   |  
|Proved properties                                                                 |  |                    | 3,074   |                    |   |        |  
|                                                                                  |  |                    |         |                    |   |         |  
|Total oil and gas properties                                                      |  |                    | 6,371   |                    |   | 7,542   |  
|                                                                                  |  |                    |         |                    |   |         |  
|                                                                                 
|Total assets                                                                      |  | $                  | 38,264  |                    | $ | 48,771  |  
|                                                                                  |  |                    |         |                    |   |         |  
|LIABILITIES
 AND MEMBERS CAPITAL                                                 |  |                    |         |                    |   |         |  
|Current liabilities:                                                              |  |                    |         |                    |   |         |  
|Due to operators                                                                  |  | $                  | 1,455   |                    | $ | 10      |  
|Accrued expenses                                                                  |  |                    | 73      |                    |   | 72      |  
|                                                                                  |  |                    |         |                    |   |         |  
|Total current liabilities                                                         |  |                    | 1,528   |                    |   | 82      |  
|                                                                                 
|Asset retirement obligations                                                      |  |                    | 57      |                    |   |        |  
|                                                                                  |  |                    |         |                    |   |         |  
|Total liabilities                                                                 |  |                    | 1,585   |                    |   | 82      |  
|                                                                                  |  |                    |         |                    |   |         |  
|Commitments and contingencies (Note 8)                                            |  |                    |         |                    |   |         |  
|Members capital:                                                                 |  |                    |         |                    |   |         |  
|Manager:                                                                          |  |                    |         |                    |   |         |  
|Deficit accumulated during the exploratory stage                                  |  |                    | (847    | )                  |   | (472    | )
|                                                                                  |  |                    |         |                    |   |         |  
|Managers total                                                                   |  |                    | (847    | )                  |   | (472    | )
|                                                                                  |  |                    |         |                    |   |         |  
|                                                                                 
|Shareholders:                                                                     |  |                    |         |                    |   |         |  
|Capital contributions (1,000 shares authorized; 486.4825 issued and
 outstanding) |  |                    | 72,381  |                    |   | 72,381  |  
|Syndication costs                                                                 |  |                    | (8,541  | )                  |   | (8,541  | )
|Subscription receivable                                                           |  |                    |        |                    |   | (23     | )
|Deficit accumulated during the exploratory stage                                  |  |                    | (26,700 | )                  |   | (14,672 | )
|                                                                                  |  |                    |         |                    |   |         |  
|Shareholders total                                                               |  |                    | 37,140  |                    |   | 49,145  |  
|                                                                                 
|Accumulated other comprehensive income                                            |  |                    | 386     |                    |   | 16      |  
|                                                                                  |  |                    |         |                    |   |         |  
|                                                                                 
|Total members capital                                                            |  |                    | 36,679  |                    |   | 48,689  |  
|                                                                                  |  |                    |         |                    |   |         |  
|                                                                                 
|Total liabilities and members capital                                            |  | $                  | 38,264  |                    | $ | 48,771  |  
|                                                                                  |  |                    |         |                    |   |         |  

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

F-3

---



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

|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|---------------------------------------- |  | ----------------------- | ------- | ---------------------------------------------------------------------- | - | ------ | - | - | ------- | -
|                                         |  |                         |         | For the period August 28, 2006
 (Inception) through
 December 31, 2008 |  
|                                         |  |                         |         |                                                                       
|                                         |  |                         |         |                                                                       
|                                         |  | Year ended December 31, |         |                                                                       
|                                         |  | 2008                    |         | 2007                                                                   |   |       
|                                         |  |                         |         |                                                                        |   |        |  
|Revenue                                  |  |                         |         |                                                                        |   |        |   |   |         |  
|Oil and gas revenue                      |  | $                       |        |                                                                        | $ |       |   | $ |        |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Expenses                                 |  |                         |         |                                                                        |   |        |   |   |         |  
|Dry-hole costs                           |  |                         | 11,378  |                                                                        |   | 3,964  |   |   | 23,091  |  
|Investment fees to affiliate (Note 6)    |  |                         |        |                                                                        |   | 20     |   |   | 3,272   |  
|Management fees to affiliate (Note 6)    |  |                         | 1,418   |                                                                        |   | 1,534  |   |   | 3,205   |  
|Operating expenses                       |  |                         | 94      |                                                                        |   |       |   |   | 94      |  
|General and administrative expenses      |  |                         | 452     |                                                                        |   | 453    |   |   | 1,233   |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Total expenses                           |  |                         | 13,342  |                                                                        |   | 5,971  |   |   | 30,895  |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Loss from operations                     |  |                         | (13,342 | )                                                                      |   | (5,971 | ) |   | (30,895 | )
|Other income                             |  |                         |         |                                                                        |   |        |   |   |         |  
|Interest income                          |  |                         | 939     |                                                                        |   | 2,174  |   |   | 3,348   |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Net loss                                 |  | $                       | (12,403 | )                                                                      | $ | (3,797 | ) | $ | (27,547 | )
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Other comprehensive income               |  |                         |         |                                                                        |   |        |   |   |         |  
|Unrealized gain on marketable securities |  |                         | 370     |                                                                        |   | 16     |   |   | 386     |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Total comprehensive loss                 |  | $                       | (12,033 | )                                                                      | $ | (3,781 | ) | $ | (27,161 | )
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|                                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Manager Interest                         |  |                         |         |                                                                        |   |        |   |   |         |  
|Net loss                                 |  | $                       | (375    | )                                                                      | $ | (310   | ) | $ | (847    | )
|                                        
|Shareholder Interest                     |  |                         |         |                                                                        |   |        |   |   |         |  
|Net loss                                 |  | $                       | (12,028 | )                                                                      | $ | (3,487 | ) | $ | (26,700 | )
|Net loss per share                       |  | $                       | (24,725 | )                                                                      | $ | (7,168 | ) | $ | (54,885 | )

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

F-4

---



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

|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------- | ------- | - | ------------ | - | --------------------------- | ------- | ----- | - | --- |  | - | ------- | -
|                                                                                                                                                                                        |  | # of Shares |          | Manager |   | Shareholders |   | Other Comprehensive
 Income |         | Total |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |  
|                                                                                                                                                                                       
|Balances, August 28, 2006 (Inception)                                                                                                                                                   |  |             |         |         | $ |             |   | $                           |        |       | $ |    |  | $ |        |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Shareholders capital contributions                                                                                                                                                     |  |             | 483.4529 |         |   |             |   |                             | 71,923  |       |   |    |  |   | 71,923  |  
|Syndication costs (included offering fee of $2,529 paid to the
 Manager and commissions and placement fees of $68 and $723, respectively,
 paid to Ridgewood Securities Corp. - Note 6) |  |             |         |         |   |             |   |                             | (8,480  | )     |   |    |  |   | (8,480  | )
|Subscription receivable                                                                                                                                                                 |  |             |         |         |   |             |   |                             | (2,827  | )     |   |    |  |   | (2,827  | )
|Net loss                                                                                                                                                                                |  |             |         |         |   | (162         | ) |                             | (11,185 | )     |   |    |  |   | (11,347 | )
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Balances, December 31, 2006                                                                                                                                                             |  |             | 483.4529 |         |   | (162         | ) |                             | 49,431  |       |   |    |  |   | 49,269  |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Shareholders capital contributions                                                                                                                                                     |  |             | 3.0296   |         |   |             |   |                             | 458     |       |   |    |  |   | 458     |  
|Syndication costs                                                                                                                                                                       |  |             |         |         |   |             |   |                             | (61     | )     |   |    |  |   | (61     | )
|Collection of subscription receivable                                                                                                                                                   |  |             |         |         |   |             |   |                             | 2,804   |       |   |    |  |   | 2,804   |  
|Net loss                                                                                                                                                                                |  |             |         |         |   | (310         | ) |                             | (3,487  | )     |   |    |  |   | (3,797  | )
|Other comprehensive income                                                                                                                                                              |  |             |         |         |   |             |   |                             |        |       |   | 16  |  |   | 16      |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Balances, December 31, 2007                                                                                                                                                             |  |             | 486.4825 |         |   | (472         | ) |                             | 49,145  |       |   | 16  |  |   | 48,689  |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Collection of subscription receivable                                                                                                                                                   |  |             |          |         |   |              |   |                             | 23      |       |   |    |  |   | 23      |  
|Net loss                                                                                                                                                                                |  |             |          |         |   | (375         | ) |                             | (12,028 | )     |   |    |  |   | (12,403 | )
|Other comprehensive income                                                                                                                                                              |  |             |          |         |   |              |   |                             |         |       |   | 370 |  |   | 370     |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  
|Balances, December 31, 2008                                                                                                                                                             |  |             | 486.4825 |         | $ | (847         | ) | $                           | 37,140  |       | $ | 386 |  | $ | 36,679  |  
|                                                                                                                                                                                        |  |             |          |         |   |              |   |                             |         |       |   |     |  |   |         |  

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

F-5

---



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

|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|---------------------------------------------------------------------------- |  | ----------------------- | ------- | ------------------------------------------------------------------------ | - | ------- | - | - | ------- | -
|                                                                             |  |                         |         | For the period
 August 28, 2006
 (Inception)
 through
 December 31, 2008 |  
|                                                                             |  |                         |         |                                                                         
|                                                                             |  |                         |         |                                                                         
|                                                                             |  |                         |         |                                                                         
|                                                                             |  | Year ended December 31, |         |                                                                         
|                                                                             |  | 2008                    |         | 2007                                                                     |   |        
|                                                                             |  |                         |         |                                                                          |   |         |  
|                                                                            
|Cash flows from operating activities                                         |  |                         |         |                                                                          |   |         |  
|Net loss                                                                     |  | $                       | (12,403 | )                                                                        | $ | (3,797  | ) | $ | (27,547 | )
|Adjustments to reconcile net loss to net cash used in operating
 activities: |  |                         |         |                                                                          |   |         |   |   |         |  
|Dry-hole costs                                                               |  |                         | 11,378  |                                                                          |   | 3,964   |   |   | 23,091  |  
|Accretion expense                                                            |  |                         | 1       |                                                                          |   |        |   |   | 1       |  
|Amortization of premium on investment                                        |  |                         | 57      |                                                                          |   | 3       |   |   | 60      |  
|Interest earned on marketable securities                                     |  |                         | (282    | )                                                                        |   | (21     | ) |   | (303    | )
|Changes in assets and liabilities:                                           |  |                         |         |                                                                          |   |         |   |   |         |  
|Decrease (increase) in other current assets                                  |  |                         | 57      |                                                                          |   | 36      |   |   | (61     | )
|Decrease in due to affiliates                                                |  |                         |        |                                                                          |   | (443    | ) |   |        |  
|Increase (decrease) in accrued expenses payable                              |  |                         | 2       |                                                                          |   | (10     | ) |   | 73      |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Net cash used in operating activities                                        |  |                         | (1,190  | )                                                                        |   | (268    | ) |   | (4,686  | )
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Cash flows from investing activities                                         |  |                         |         |                                                                          |   |         |   |   |         |  
|Payments to operators for working interests and expenditures                 |  |                         | (1,402  | )                                                                        |   |        |   |   | (1,402  | )
|Capital expenditures for oil and gas properties                              |  |                         | (7,360  | )                                                                        |   | (19,245 | ) |   | (26,605 | )
|Salvage fund investments                                                     |  |                         | (31     | )                                                                        |   | (1,033  | ) |   | (1,064  | )
|Investment in held-to-maturity securities                                    |  |                         | (12,185 | )                                                                        |   | (11,999 | ) |   | (24,184 | )
|Investment in available-for-sale securities                                  |  |                         |        |                                                                          |   | (14,729 | ) |   | (14,729 | )
|Proceeds from the sale of marketable securities                              |  |                         | 24,487  |                                                                          |   |        |   |   | 24,487  |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Net cash provided by (used in) investing activities                          |  |                         | 3,509   |                                                                          |   | (47,006 | ) |   | (43,497 | )
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Cash flows from financing activities                                         |  |                         |         |                                                                          |   |         |   |   |         |  
|Contributions from shareholders                                              |  |                         | 23      |                                                                          |   | 3,262   |   |   | 72,381  |  
|Syndication costs paid                                                       |  |                         | (1      | )                                                                        |   | (1,105  | ) |   | (8,541  | )
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Net cash provided by financing activities                                    |  |                         | 22      |                                                                          |   | 2,157   |   |   | 63,840  |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Net increase (decrease) in cash and cash equivalents                         |  |                         | 2,341   |                                                                          |   | (45,117 | ) |   | 15,657  |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Cash and cash equivalents, beginning of period                               |  |                         | 13,316  |                                                                          |   | 58,433  |   |   |        |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  
|Cash and cash equivalents, end of period                                     |  | $                       | 15,657  |                                                                          | $ | 13,316  |   | $ | 15,657  |  
|                                                                             |  |                         |         |                                                                          |   |         |   |   |         |  

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

F-6

---



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

1. Organization and Purpose

The Ridgewood
Energy U Fund, LLC (the Fund) (an exploratory stage enterprise), a Delaware
limited liability company, was formed on August 28, 2006 and operates pursuant
to a limited liability company agreement (the LLC Agreement) dated October 1,
2006 by and among Ridgewood Energy Corporation (the Manager), and the
shareholders of the Fund. The Fund was
organized to acquire interests in oil and natural gas properties located in the
United States offshore waters of Texas, Louisiana and Alabama in the Gulf of
Mexico. To date, the Fund has not
earned revenue from these operations.

The Manager
has direct and exclusive control over the management of the Funds operations.
With respect to project investments, the Manager locates potential projects,
conducts appropriate due diligence and negotiates and completes the
transactions in which the investments are made. The Manager performs, or
arranges for the performance of, the management, advisory and administrative
services required for Fund operations. Such services include, without
limitation, the administration of shareholder accounts, shareholder relations
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.
See Notes 2, 6 and 8.

2. Summary of Significant Accounting
Policies

Exploratory Stage
EnterpriseManagement uses various criteria to evaluate
whether the Fund is an exploratory stage enterprise, including but not limited
to, the success of drilling, the timing, significance, quality and flow of
production and the results of reserve reports obtained from experts. Once a project begins production, the Manager
performs analysis at regular intervals utilizing the various criteria noted
above to determine the appropriate classification of the Fund as an exploratory
state enterprise. Based on such
analysis, the Manager determined that the Fund is an exploratory stage
enterprise.

Use of EstimatesThe preparation of financial statements in
conformity with accounting principles generally accepted in the United States
of America (GAAP) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenue and expenses during the reporting period.
On an ongoing basis, the Manager reviews its estimates, including those related
to property balances, determination of proved reserves, impairments and asset
retirement obligations. Actual results
may differ from those estimates.

Cash and Cash
EquivalentsAll highly liquid investments with maturities,
when purchased, of three months or less are considered cash and cash
equivalents. At times, bank deposits
may be in excess of federally insured limits.
At December 31, 2008, bank balances, inclusive of salvage fund, exceeded
federally insured limits by $11.6 million, all of which was invested in money
market accounts that invest solely in U.S. Treasury bills and notes. The Fund maintains bank deposits with
accredited financial institutions.
Effective October 2008 through December 31, 2009, federally insured
limits have been increased from $0.1 million to $0.25 million for interest
bearing deposits. Additionally,
non-interest bearing deposits are fully insured during this period.

Investments in
Marketable SecuritiesAt times the Fund may invest in U.S. Treasury
bills and notes. These investments are
considered short-term when their maturities are greater than three months and
one year or less, and long-term when their maturities are in excess of one
year. At December 31, 2007, the Fund had short-term held-to-maturity
investments totaling $12.0 million.
Held-to-maturity investments are those securities that the Fund has the
ability and intent to hold until maturity, and are recorded at cost plus
accrued income, adjusted for the amortization of premiums and discounts, which
approximates fair value. There were no short-term held-to-maturity investments
at December 31, 2008.

The Fund also
currently has short-term investments, which mature in December 2009, that are
classified as available-for-sale.
Available-for-sale securities are carried in the financial statements at
fair value. The following table is a
summary of available-for-sale investments at December 31, 2008 and 2007:

|                    |  |                 |        |                          |   |             |  |   |        | 
|------------------- |  | --------------- | ------ | ------------------------ | - | ----------- |  | - | ------ | 
|                    |  | Amortized
 Cost |        | Gross
 Unrealized
 Gains |   | Fair
 Value | 
|                    |  |                 |        |                          |   |             | 
|                    |  | (in thousands)  |       
|Available-for-Sale  |  |                 |        |                          |   |             |  |   |        | 
|                   
|U.S. Treasury notes |  | $               | 14,669 |                          | $ | 386         |  | $ | 15,055 | 
|December 31, 2008   |  |                 |        |                          |   |             |  |   |        | 
|                    |  |                 |        |                          |   |             |  |   |        | 
|December 31, 2007   |  | $               | 14,726 |                          | $ | 16          |  | $ | 14,742 | 

F-7

---



For all
investments, interest income is accrued as earned and amortization of premium
or discount, if any, is included in interest income. Unrealized gains or losses
for available-for-sale securities are reported in other comprehensive income
until realized.

Salvage
FundThe Fund
deposits in a separate interest-bearing account, or a salvage fund, money to
provide for the dismantling and removal of production platforms and facilities
and plugging and abandoning its wells at the end of their useful lives, in accordance
with applicable federal and state laws and regulations. At December 31, 2008,
the Fund had a held-to-maturity investment within its salvage fund totaling
$1.0 million, which matures in May 2012.

Interest
earned on the account will become part of the salvage fund. There are no legal
restrictions on withdrawals from the salvage fund.

Oil and Gas
PropertiesInvestments in
oil and gas properties are operated by unaffiliated entities that 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 is billed by the operators.

The successful
efforts method of accounting for oil and gas producing activities is followed.
Acquisition costs are capitalized when incurred. Other oil and 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 crude oil and 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, the cost and related accumulated depletion
and amortization will be eliminated from the property accounts, and the
resultant gain or loss is recognized. Upon the sale or retirement of an
unproved property, gain or loss on the sale is recognized. The Manager does not
currently intend to sell any of the Funds property interests.

Capitalized
acquisition costs of producing oil and gas properties are depleted by the
unit-of-production method.

As of December
31, 2008 amounts recorded in due to operators totaling $1.5 million related to
capital expenditures for oil and gas property.

Advances to
Operators for Working Interests and ExpendituresThe Funds
acquisition of a working interest in a well or a project may require it to make
a payment to the seller for the Funds right, title and interest. The Fund may
be required to advance its share of estimated cash expenditures 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 reclassified to unproved properties.

F-8

---



Asset Retirement
ObligationsFor oil and
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 properties
are expensed as dry-hole costs. The table below presents changes in asset
retirement obligations for the years ended December 31, 2008 and 2007.

|                               |  |                |    |      |   |   | 
|------------------------------ |  | -------------- | -- | ---- | - | - | 
|                               |  | 2008           |    | 2007 |  
|                               |  |                |    |      |  
|                               |  | (in thousands) |   
|Balance - Beginning of
 period |  | $              |   |      | $ |  | 
|Liabilities incurred           |  |                | 56 |      |   |  | 
|Liabilities settled            |  |                |   |      |   |  | 
|Accretion expense              |  |                | 1  |      |   |  | 
|                               |  |                |    |      |   |   | 
|Balance - End of period        |  | $              | 57 |      | $ |  | 
|                               |  |                |    |      |   |   | 

As indicated
above, the Fund maintains a salvage fund to provide for the funding of future
asset retirement obligations.

Syndication CostsSyndication
costs are incurred by the Fund in connection with the offering of the Funds
shares, including professional fees, selling expenses and administrative costs
payable to the Manager, an affiliate of the Manager and unaffiliated
broker-dealers, which are reflected on the Funds balance sheet as a reduction
of shareholders capital.

Revenue Recognition
and ImbalancesUpon
production, oil and gas revenues are recognized when oil and gas is sold
to a purchaser at a fixed or determinable price, when delivery has occurred and
title has transferred, and if collectability of the revenue is probable. The Fund has not earned revenue from
inception through December 31, 2008.

The Fund will
use the sales method of accounting for gas production imbalances. The volumes
of gas sold may differ from the volumes to which the Fund is entitled based on
its interests in the properties. These differences create imbalances that are
recognized as a liability only when the properties estimated remaining
reserves net to the Fund will not be sufficient to enable the under-produced
owner to recoup its entitled share through production. The Funds recorded
liability, if any, would be reflected in other liabilities. No receivables are
recorded for those wells where the Fund has taken less than its share of
production.

Impairment of
Long-Lived AssetsIn accordance
with the provisions of the Statement of Financial Accounting Standards (SFAS)
No. 144, Accounting for the Impairment of Long-Lived Assets, long-lived
assets, such as oil and 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. For the
years ended December 31, 2008 and 2007 and for the period August 28, 2006
(Inception) through December 31, 2008, no impairments were recorded. Fair value
determinations require considerable judgment and are sensitive to changes in
the factors described above, thus impairments could occur in future periods.

Depletion and
AmortizationDepletion and
amortization of the cost of proved oil and gas properties are calculated using
the units of production method. Proved developed reserves are used as the base
for depleting capitalized costs associated with successful exploratory wells.
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. The Fund has not begun
production as of December 31, 2008 and accordingly has not recorded depletion.

Income TaxesNo provision
is made for income taxes in the financial statements. The Fund is a limited
liability company, and as such, the Funds income or loss is passed through and
included in the tax returns of the Funds shareholders.

Income and Expense
AllocationProfits and
losses are allocated 85% to shareholders in proportion to their relative
capital contributions and 15% to the Manager, except for interest income and
certain expenses, such as dry-hole costs, trust fees, depletion and
amortization, which are allocated 99% to shareholders and 1% to the Manager.

F-9

---



3. Recent Accounting Standards

In
December 2008 the Securities and Exchange Commission (SEC) announced
final approval of new requirements for reporting oil and gas reserves. The new
requirements provide for consideration of new technologies in evaluating
reserves, allow companies to disclose their probable and possible reserves to
investors, report oil and gas reserves using an average price based on the
prior 12-month period rather than year-end prices, and revise the disclosure
requirements for oil and gas operations. The new rule is expected to be
effective for fiscal years ending on or after December 31, 2009. The
Fund has not yet evaluated the effects of these new requirements on its
financial statements and disclosures.

In May 2008,
the Financial Accounting Standards Board (FASB) issued SFAS No. 162, The
Hierarchy of Generally Accepted Accounting Principles, (SFAS No.162), which
identifies the sources of accounting principles and the framework for selecting
the principles used in the preparation of financial statements that are
presented in conformity with GAAP. SFAS No. 162 will be effective sixty days
following the SECs approval of the Public Company Accounting Oversight Board
amendments to AU Section 411. The Fund does not expect the adoption of SFAS No.
162 will have a material impact on its financial condition or results of
operation.

In February
2007, the 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 (i) is
applied instrument by instrument, with a few exceptions; (ii) is irrevocable;
and (iii) 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. The Fund did not
elect to measure existing assets and liabilities at fair value on the date of
adoption.

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
had originally been effective for financial statements issued for fiscal years
beginning after November 15, 2007, however the FASB has agreed on a one year
deferral for all non-financial assets and liabilities. On January 1, 2008, the
Fund adopted SFAS No. 157 for financial assets and liabilities. See Note 7 for
related disclosure.

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 accessing reserves.

The following table reflects the net changes in unproved properties for
the years ended December 31, 2008 and 2007. At December 31, 2008,
the Fund had no capitalized exploratory well costs greater than one year.

|                                                                                              |  |                |        |      |   |        |  
|--------------------------------------------------------------------------------------------- |  | -------------- | ------ | ---- | - | ------ | -
|                                                                                              |  | 2008           |        | 2007 |  
|                                                                                              |  |                |        |      |  
|                                                                                              |  | (in thousands) |       
|Balance - Beginning of the period                                                             |  | $              | 7,542  |      | $ |       |  
|Additions to capitalized exploratory well costs pending the
 determination of proved reserves |  |                | 4,375  |      |   | 8,960  |  
|Reclassifications to proved properties based on the determination of
 proved reserves         |  |                | (2,162 | )    |   |       |  
|Capitalized exploratory well costs charged to dry hole costs                                  |  |                | (7,860 | )    |   | (1,418 | )
|                                                                                              |  |                |        |      |   |        |  
|                                                                                             
|Balance - End of the period                                                                   |  | $              | 1,895  |      | $ | 7,542  |  
|                                                                                              |  |                |        |      |   |        |  

F-10

---



Capitalized exploratory well 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. For the year ended December 31, 2008, the Fund
received credits on certain wells from their respective operators upon review
and audit of the wells costs. Dry-hole costs, inclusive of credits, are
detailed in the table below.

|                      |  |                         |                |                                                      |   |                   |  |   |        | 
|--------------------- |  | ----------------------- | -------------- | ---------------------------------------------------- | - | ----------------- |  | - | ------ | 
|                      |  | Year ended December 31, |                | For the period
 August 28, 2006
 (Inception) through |  
|Lease
 Block          |  | 2008                    |                | 2007                                                 |   | December 31, 2008 | 
|                      |  |                         |                |                                                      |   |                   | 
|                      |  |                         | (in thousands)
|                     
|South Timbalier 135   |  | $                       | (24            | )                                                    | $ | 2,546             |  | $ | 10,271 | 
|Walker Ridge 155      |  |                         | 7,818          |                                                      |   |                  |  |   | 7,818  | 
|Eos Project           |  |                         | 3,296          |                                                      |   |                  |  |   | 3,296  | 
|Eugene Island 255/256 |  |                         | 1              |                                                      |   | 1,418             |  |   | 1,419  | 
|Bison Project         |  |                         | 287            |                                                      |   |                  |  |   | 287    | 
|                      |  |                         |                |                                                      |   |                   |  |   |        | 
|                      |  | $                       | 11,378         |                                                      | $ | 3,964             |  | $ | 23,091 | 
|                      |  |                         |                |                                                      |   |                   |  |   |        | 

5. Distributions

Distributions
to shareholders are allocated in proportion to the number of shares held.
Certain shares have early investment incentive and advance distribution rights,
as defined in the Funds LLC Agreement, which range from approximately an
additional $6 thousand to $12 thousand per share.

The Manager
will determine whether available cash from operations, as defined in the Funds
LLC Agreement, is to be distributed. Such distributions will be allocated 85%
to the shareholders and 15% to the Manager, as required by the Funds LLC
Agreement.

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 since inception.

6. Related Parties

The Fund
incurred a one-time investment fee of approximately 4.5% of initial capital
contributions, payable to the Manager. Fees are payable for services of
investigating and evaluating investment opportunities and effecting
transactions and are expensed as incurred. For the year ended December 31, 2007
and for the period August 28, 2006 (Inception) through December 31, 2008,
investment fees were $20 thousand and $3.3 million, respectively. For the year
ended December 31, 2008 there were no investment fees. At December 31, 2007,
the Fund owed the Manager $1 thousand related to investment fees, which is
included in accrued expenses payable. At December 31, 2008, there were no such
amounts payable.

The Fund
incurred an offering fee, payable to the Manager, totaling $3.2 million, which
approximated 3.5% of capital contributions, directly related to the offer and
sale of Shares of the Fund. Such offering fee was included in syndication costs
of $8.5 million. At December 31, 2007, $1 thousand of offering fees were
included in accrued expenses. At December 31, 2008, there were no such amounts
payable.

For the period
August 28, 2006 (Inception) through December 31, 2008, Ridgewood Securities
Corporation, a registered broker-dealer affiliated with the Manager, was paid
commissions and placement fees for Shares sold of the Fund of $0.1 million and
$0.7 million, respectively, which were reflected in syndication costs. See Note
2.

The LLC
Agreement provides that the Manager render management, administrative and
advisory services. For such services, the Manager is paid an annual management
fee, payable monthly, of 2.5% of total capital contributions, net of cumulative
dry-hole and related well costs incurred by the Fund. Management fees for the
years ended December 31, 2008 and 2007, and for the period August 28, 2006
(Inception) through December 31, 2008 were $1.4 million, $1.5 million, and $3.2
million, respectively.

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

At times, short-term
payables and receivables, which do not bear interest, arise from transactions
with affiliates in the ordinary course of business. At December 31, 2008 and
2007, there were no such amounts payable or receivable.

F-11

---



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.

7. Fair Value of Financial Instruments and
Measurements

At December
31, 2008 and 2007, the carrying value of cash and cash equivalents, short-term
investments in marketable securities, salvage fund, and accrued expenses
approximated fair value.

In accordance
with SFAS No. 157, the Funds available-for-sale investments are measured
utilizing Level 1 inputs, which are quoted prices in active markets.

8. Commitments and
Contingencies

Capital Commitments
The Fund has
entered into multiple agreements for the drilling and development of its
investment properties. The estimated capital expenditures associated with these
agreements vary depending on the stage of development on a property-by-property
basis. As of December 31, 2008, the Fund had committed to spend an additional
$25.8 million related to its investment properties.

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
operators of the Funds properties are continually taking action they believe
appropriate to satisfy applicable federal, state and local environmental
regulations and do not currently anticipate that compliance with federal, state
and local environmental regulations will have a material adverse effect upon
capital expenditures, results of operations or the competitive position of the
Fund in the oil and natural gas industry. However, due to the significant
public and governmental interest in environmental matters related to those
activities, the Manager cannot predict the effects of possible future
legislation, rule changes, or governmental or private claims. At December 31,
2008 and 2007, there were no known environmental contingencies 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 that 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 funds managed by the Manager. Claims made by other funds managed by the
Manager can reduce or eliminate insurance for the Fund.

9. Subsequent Events

Bison
ProjectIn November 2008, the Fund acquired a 4.0% working interest in the
Bison Project, an exploratory well, from LLOG Exploration Offshore, Inc.
(LLOG), the operator. The Bison Project, located in the Galveston region of
the Gulf of Mexico, began drilling in December 2008 and was determined to be an
unsuccessful well, or dry hole, in January 2009. For the year ended December
31, 2008, dry-hole costs related to this well, including plug and
abandonment expenses, were $0.3 million. Additional dry-hole costs of $0.1
million were incurred during the first quarter 2009.

F-12

---



Ridgewood
Energy U Fund, LLCSupplementary Financial Information
Information about Oil and Gas Producing Activities - Unaudited

In accordance
with Statement of Financial Accounting Standards No. 69, Disclosures about Oil
and Gas Producing Activities, this schedule provides supplemental information
on oil and gas exploration and producing activities of the Fund.

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

Table I - Capitalized Costs Related to Oil and Gas Producing
Activities

|                                                             |  |                |       |      |   |       | 
|------------------------------------------------------------ |  | -------------- | ----- | ---- | - | ----- | 
|                                                             |  | December 31,   |      
|                                                             |  | 2008           |       | 2007 |  
|                                                             |  |                |       |      |  
|                                                             |  | (in thousands) |      
|Advances to operators for working interests and expenditures |  | $              | 1,402 |      | $ |      | 
|Unproved properties                                          |  |                | 1,895 |      |   | 7,542 | 
|Proved properties                                            |  |                | 3,074 |      |   |      | 
|                                                             |  |                |       |      |   |       | 
|Total oil and gas properties                                 |  | $              | 6,371 |      | $ | 7,542 | 
|                                                             |  |                |       |      |   |       | 

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

|                                         |  |                         |        |      |   |        | 
|---------------------------------------- |  | ----------------------- | ------ | ---- | - | ------ | 
|                                         |  | Year ended December 31, |       
|                                         |  | 2008                    |        | 2007 |  
|                                         |  |                         |        |      |  
|                                         |  | (in thousands)          |       
|Exploratory drilling costs - capitalized |  | $                       | 6,371  |      | $ | 7,542  | 
|Exploratory drilling costs - expensed    |  |                         | 3,836  |      |   | 3,964  | 
|Geological costs                         |  |                         | 93     |      |   |       | 
|                                         |  |                         |        |      |   |        | 
|                                         |  | $                       | 10,300 |      | $ | 11,506 | 
|                                         |  |                         |        |      |   |        | 

Table III - Reserve Quantity Information

As of December 31, 2008, oil
and gas reserve data for the Fund is based upon the Funds internal engineering
estimates. These reserve disclosures have been prepared in compliance with the
Securities and Exchange Commission rules. Due to inherent uncertainties and the
limited nature of recovery data, estimates of reserve information are subject
to change as additional information becomes available. As of December 31, 2007,
the fund had no proved reserves.

|                                |  |                   |       |           |  |           | 
|------------------------------- |  | ----------------- | ----- | --------- |  | --------- | 
|                                |  | December 31, 2008 |      
|                                |  |                   |      
|                                |  | United States     |      
|                                |  | Oil (BBLS)        |       | Gas (MCF) | 
|                                |  |                   |       |           | 
|Proved developed reserves:      |  |                   |       |           |  |           | 
|Beginning of year               |  |                   |      |           |  |          | 
|Discoveries                     |  |                   | 3,935 |           |  | 1,269,000 | 
|Revisions of previous estimates |  |                   |      |           |  |          | 
|Production                      |  |                   |      |           |  |          | 
|                                |  |                   |       |           |  |           | 
|End of year                     |  |                   | 3,935 |           |  | 1,269,000 | 
|                                |  |                   |       |           |  |           | 

F-13

---



Table IV - Standardized Measure of Discounted Future Net Cash
Flows Related to Proved Oil and Gas Reserves

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, 2008 |       
|                                                                   |  |                   |       
|                                                                   |  | (in thousands)    |       
|Future estimated revenues                                          |  | $                 | 7,759  |  
|Future estimated production costs                                  |  |                   | (224   | )
|Future estimated development costs                                 |  |                   | (1,022 | )
|                                                                   |  |                   |       
|Future net cash flows                                              |  |                   | 6,513  |  
|10% annual discount for estimated timing of cash flows             |  |                   | (1,375 | )
|                                                                   |  |                   |        |  
|Standardized measure of discounted future estimated net cash flows |  | $                 | 5,138  |  
|                                                                   |  |                   |        |  

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

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, 2008 |      
|                                                                                   |  |                              |      
|                                                                                   |  | (in thousands)               |      
|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 |  |                              | 5,138 | 
|Development costs incurred during the period                                       |  |                              |      | 
|Revisions of previous reserve quantities estimate                                  |  |                              |      | 
|Revision due to timing of cash flows                                               |  |                              |      | 
|Accretion of discount                                                              |  |                              |      | 
|Timing and other                                                                   |  |                              |      | 
|                                                                                   |  |                              |       | 
|Standardized measure end of the year                                               |  | $                            | 5,138 | 
|                                                                                   |  |                              |       | 

F-14

---



SIGNATURES

Pursuant to the requirements of
Section 13 or 15(d) 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 U FUND, LLC
|                    |  |                              |                              
|Date: March 4, 2009 |  | By:                          | /s/ ROBERT E. SWANSON        
|                    |  |                              |                              
|                    |  |                              | Robert E. Swanson            
|                    |  |                              | Chief Executive Officer      
|                    |  |                              | (Principal Executive Officer)

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

|                              |  |                                                                                                    |  |              
|----------------------------- |  | -------------------------------------------------------------------------------------------------- |  | -------------
|Signature                     |  | Capacity                                                                                           |  | Date         
|                              |  |                                                                                                    |  |              
|/s/ ROBERT E. SWANSON         |  | Chief Executive Officer (Principal Executive Officer)                                              |  | March 4, 2009
|                              |  |                                                                                                    | 
|Robert E. Swanson             |  |                                                                                                    | 
|                              |  |                                                                                                    |  |              
|/s/ KATHLEEN P. McSHERRY      |  | Executive Vice President and Chief Financial
 Officer (Principal Financial and Accounting Officer) |  | March 4, 2009
|                              |  |                                                                                                    | 
|Kathleen P. McSherry          |  |                                                                                                    | 
|                              |  |                                                                                                    | 
|RIDGEWOOD ENERGY
 CORPORATION |  |                                                                                                    |  |              
|                              |  |                                                                                                    |  |              
|BY: /s/ ROBERT E. SWANSON     |  | Chief Executive Officer of Manager                                                                 |  | March 4, 2009
|                              |  |                                                                                                    | 
|Robert E. Swanson             |  |                                                                                                    | 



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