---

UNITED STATES 
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007

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.)

1314 King Street, Wilmington, Delaware 19801(Address of principal executive offices) (Zip
code)

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

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

Shares of LLC Membership Interest

Indicate by
check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes  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. As of February 20, 2008 there are 486.4825 Shares
outstanding.

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RIDGEWOOD ENERGY U FUND, LLC
2007 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS

|         |         |                                                                                                                       |  |     
|-------- | ------- | --------------------------------------------------------------------------------------------------------------------- |  | ----
|         |         |                                                                                                                       |  | PAGE
|PART I   |         |                                                                                                                       |  |     
|         | ITEM 1  | BUSINESS                                                                                                              |  | 4   
|         | ITEM 1A | RISK
  FACTORS                                                                                                        |  | 12  
|         | ITEM 1B | UNRESOLVED
  STAFF COMMENTS                                                                                           |  | 12  
|         | ITEM 2  | PROPERTIES                                                                                                            |  | 13  
|         | ITEM 3  | LEGAL
  PROCEEDINGS                                                                                                   |  | 13  
|         | ITEM 4  | SUBMISSION
  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                 |  | 13  
|PART II  |         |                                                                                                                       |  |     
|         | ITEM 5  | MARKET
  FOR REGISTRANTS COMMON EQUITY, RELATED SECURITY
  HOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |  | 13  
|         | ITEM 6  | SELECTED
  FINANCIAL DATA                                                                                             |  | 14  
|         | ITEM 7  | MANAGEMENTS
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  AND RESULTS OF OPERATIONS                             |  | 15  
|         | ITEM 7A | QUANTITATIVE
  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                          |  | 20  
|         | ITEM 8  | FINANCIAL
  STATEMENTS AND SUPPLEMENTARY DATA                                                                         |  | 20  
|         | ITEM 9  | CHANGES
  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                                |  | 20  
|         | ITEM 9A | CONTROLS
  AND PROCEDURES                                                                                             |  | 20  
|         | ITEM 9B | OTHER
  INFORMATION                                                                                                   |  | 21  
|PART III |         |                                                                                                                       |  |     
|         | ITEM 10 | DIRECTORS,
  EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                              |  | 21  
|         | ITEM 11 | EXECUTIVE
  COMPENSATION                                                                                              |  | 23  
|         | ITEM 12 | SECURITY
  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT AND RELATED SECURITY HOLDER MATTERS                |  | 23  
|         | ITEM 13 | CERTAIN
  RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
  INDEPENDENCE                                          |  | 23  
|         | ITEM 14 | PRINCIPAL
  ACCOUNTANT FEES AND SERVICES                                                                              |  | 24  
|PART IV  |         |                                                                                                                       |  |     
|         | ITEM 15 | EXHIBITS
  AND FINANCIAL STATEMENT SCHEDULES                                                                          |  | 24  
|         |         |                                                                                                                       |  |     

2

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FORWARD-LOOKING STATEMENTS

Certain
statements in this Annual Report on Form 10-K (Annual Report) of the
Ridgewood Energy U Fund, LLC (the Fund) and the documents that are
incorporated by reference into this Annual Report, other than purely historical
information, including estimates, projections, statements relating to the
Funds business plans, strategies, objectives and expected operating results,
and the assumptions upon which those statements are based, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995, Section 27A of the Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Securities Exchange Act of 1934 (the Exchange
Act). These forward-looking statements generally are identified by the words
believe, project, expect, anticipate, estimate, intend,
strategy,
plan, target, pursue, may, will, would, will be,
will continue,
will likely result, and similar expressions. Forward-looking statements are
based on current expectations and assumptions that are subject to risks and
uncertainties that may cause actual results to differ materially from the
forward-looking statements. 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.

AVAILABLE INFORMATION

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

REPORTS TO SHAREHOLDERS

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

WHERE YOU CAN GET MORE INFORMATION

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

3

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PART I

|        |         
|------- | --------
|ITEM 1. | BUSINESS

Overview

Ridgewood
Energy U Fund, LLC (the Fund) (an exploratory stage enterprise) is a Delaware
limited liability company and was formed on August 28, 2006 to acquire
interests primarily in oil and natural gas projects located in the U.S. waters
of the Gulf of Mexico. Ridgewood Energy Corporation (Ridgewood Energy or the
Manager), a Delaware corporation, is the Manager. As the Manager, Ridgewood
Energy has direct and exclusive control over the management and control of Fund
operations.

The Fund
initiated its private placement offering on October 1, 2006, selling whole and
fractional shares of membership interests (the Shares) primarily at $150 thousand per share.
There is no public market for these shares and one is not likely to develop. In
addition, the shares are subject to severe restrictions on transfer and resale
and cannot be transferred or resold except in accordance with the Funds
limited liability company agreement (the LLC Agreement) and applicable
federal and state securities laws. The offering was terminated on January 19, 2007.
The Fund raised approximately $72.4 million, and after payments totaling $11.8
million in offering fees, commissions and investment fees, the Fund had
approximately $60.6 million for investments and operating expenses. As of
February 19, 2008, the Fund had 930 shareholders.

Manager

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

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

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

As
compensation for their management services, the Manager is entitled to an
annual management fee, which is equal to 2.5% of the total shareholder capital
contributions net of cumulative dry-hole expenses incurred by the Fund, payable
monthly. The Manager received from the Fund for its management services a total
of approximately $1.5 million, $0.3 million and $1.8 million for the year ended
December 31, 2007, the period August 28, 2006 (Inception) through December 31,
2006, and the period August 28, 2006 (Inception) through December 31, 2007,
respectively. In addition, the Manager is also entitled to a 15% interest in
the cash distributions. There have been no cash distributions to the Manager
paid through December 31, 2007.

Business Strategy

The Funds
primary investment objective is to generate cash flow from the acquisition,
exploration, production and sale of crude oil and natural gas from oil and
natural gas projects. The Fund has invested and participates in exploration and
production projects located in the waters of the Gulf of Mexico offshore Texas,
Louisiana and Alabama on the Outer Continental Shelf (the OCS). These activities
are governed by the Outer Continental Shelf Lands Act (the OCSLA) enacted in 1953
and administered by the Mineral Management Services (the MMS).

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

4

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

Managers Investment Committee and Investment
Criteria

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

Properties

The Fund owns
working interests and has participated in the drilling of three wells, two of
which have been determined to be dry holes, and one that is currently drilling.

|                            |  |                  |          |   |  |          |                                      |  |              |        |        |        |                |                                          |       |  |   |        |  |  |                   | 
|--------------------------- |  | ---------------- | -------- | - |  | -------- | ------------------------------------ |  | ------------ | ------ | ------ | ------ | -------------- | ---------------------------------------- | ----- |  | - | ------ |  |  | ----------------- | 
|                            |  | Working
Interest |          |   |  |          | Off-shore
Location in
Gulf of
Mexico |  | Target
Depth |        |        |        |                | Total Spent
  ThroughDecember
  31, 2007 |       |  |   |       
|Lease Block                 |  |                  | Operator |   |  |          | DrillingRisk (b)                     |  |              | Status |       
|                            |  |                  |          |   |  |          |                                      |  |              |        |        |        |                |                                          |      
|                            |  |                  |          |   |  |          |                                      |  |              |        | (Feet) |        | (in thousands) |                                          |       |  |  
|                            |  |                  |          |   |  |          |                                      |  |              |        |        |        |                |                                          |       |  |   |        |  | 
|Walker Ridge 155            |  |                  | 3.5      | % |  | Anadarko |                                      |  | Louisiana    |        |        | 32,000 |                | $                                        | 8,120 |  | $ | 7,542  |  |  | Drilling          | 
|South Timbalier 135/136 (a) |  |                  | 15.0     | % |  | Chevron  |                                      |  | Louisiana    |        |        | N/A    |                |                                          | N/A   |  | $ | 10,295 |  |  | Dry: January 2007 | 
|Eugene Island 255/256 (a)   |  |                  | 15.0     | % |  | Helis    |                                      |  | Louisiana    |        |        | N/A    |                |                                          | N/A   |  | $ | 1,418  |  |  | Dry: May 2007     | 

|    |                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Dry-hole costs represent
  wells that have been drilled but do not have commercially productive oil
  and/or natural gas reservoirs and have been plugged and abandoned.                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                        
|(b) | Drilling risk represents
  the estimated projected dry-hole costs, leasehold costs or sunk costs
  including promote for project participation per an Authorization For Expenditure (AFE) adjusted for current
  operating conditions (i.e. projected cost overruns, increased drilling rates
  and other items of a similar nature).

Drilling

Walker Ridge 155

In 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 deep water project began in
mid-August 2007.

While drilling
the initial well, the Fund found traces of oil throughout much of the
4,500-foot interval as well as a thin section of high-quality oil. However,
this initial well did not encounter the sedimentary formations that had been
targeted. As a result, the working interest owners are evaluating additional
data gathered during the drilling phase as well as new three-dimensional data
to determine whether the operator should divert the well to a location more
likely to encounter commercial reservoirs. The operator plans to re-use the
majority of the initial well-bore in order to save time and money. Although
encouraged by the data gathered thus far, which confirms the presence of oil in
the geologic basin, the well has not been determined to be a successful
property. Once diverted to a new location, if the well is not deemed
commercial, it will be plugged and abandoned as a dry hole. Through December
31, 2007, the Fund has spent $7.5 million related to this property, for which
the total estimated budget is approximately $52 million.

5

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Dry Holes

South Timbalier
135/136

In 2006, the
Fund acquired a 15% working interest in the exploratory well South Timbalier
135/136 from Chevron U.S.A., Inc. (Chevron), the operator. On January 24,
2007, the Fund was informed by Chevron, that the exploratory well being drilled
did not have commercially productive quantities of either oil or natural gas
and was therefore deemed an unsuccessful well or dry-hole. Dry-hole costs
related to South Timbalier 135/136, including plug and abandonment expenses,
incurred by the Fund for the year ended December 31, 2007, for the period
August 28, 2006 (Inception) through December 31, 2006 and for the period August
28, 2006 (Inception) through December 31, 2007 were $2.5 million, $7.7 million
and $10.3 million, respectively.

Eugene Island
255/256

In 2007, the
Fund acquired a 15% working interest in the exploratory well Eugene Island
255/256 from Helis Oil & Gas Company (Helis), the operator. On May 25,
2007, the Fund was informed by Helis that the exploratory well being drilled
did not have commercially productive quantities of either oil or natural gas
and was therefore deemed an unsuccessful well or dry-hole. Dry-hole costs
related to Eugene Island 255/256, including plug and abandonment expenses,
incurred by the Fund for the year ended December 31, 2007 and for the period
August 28, 2006 (Inception) through December 31, 2007 were $1.4 million. There
were no amounts incurred for the period August 28, 2006 (Inception) through
December 31, 2006.

Working Interest in Oil and Natural Gas
Leases

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

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

The winning
bidder(s) at the lease sale, or the lessee(s), are given a lease by the MMS
that grants such lessee(s) the exclusive right to conduct oil and natural gas
exploration and production activities within a specific lease block, or working
interest. Leases in the OCS are generally issued for a primary lease term of 5,
8 or 10 years depending on the water depth of the lease block. The 5-year lease
term is for blocks in water depths generally less than 400 meters, 8 years for
depths between 400 meters to 800 meters and 10 years for depths in excess of
800 meters. During this primary lease term, except in limited circumstances,
lessees are not subject to any particular requirements to conduct exploratory
or development activities. However, once a lessee drills a well and begins
production, the lease term is extended for the duration of commercial
production.

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

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

Royalty Relief

On January 26,
2004, the MMS promulgated a rule providing incentives for companies to increase
deep oil and natural gas production in the Gulf of Mexico (the Royalty Relief
Rule). Under the Royalty Relief Rule, lessees will be eligible for royalty
relief on their existing leases if they drill and perforate wells for new and
deeper reserves at depths greater than 15,000 feet subsea. In addition, an even
larger royalty relief would be available for wells drilled and perforated
deeper than 18,000 feet subsea. It should be noted that the Royalty Relief Rule
does not extend to deep waters of the Gulf of Mexico off the continental shelf
nor does it apply if the price of natural gas exceeds approximately $10.19
Million British Thermal Units (mmbtu) adjusted annually for inflation. The
Royalty Relief Rule is limited to leases in a water depth less than 656 feet,
or 200 meters.

6

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However, in addition to the Royalty Relief Rule promulgated by the MMS,
the Deep Water Royalty Relief Act of 1995 (the Deepwater Relief Act) was
enacted to promote exploration and production of natural gas and oil in the
deepwater of the Gulf of Mexico and relieves eligible leases from paying
royalties to the U.S. Government on certain defined amounts of deepwater
production. The Deepwater Relief Act expired in the year 2000 but was extended
by the MMS to promote continued interest in deepwater. For purposes of royalty
relief, the MMS defines deepwater as depths in excess of 656 feet (200 meters).
In order for a lease to be eligible for royalty relief, it must be located in
the Gulf of Mexico and west of 87 degrees and 30 minutes West longitude
(essentially the Florida-Alabama boundary).

Currently, for leases entered into after November 2000, the MMS assigns
a lease a specific volume of royalty suspension based on how the suspension
amount would affect the economics of the leases development. Any such royalty
suspension applicable to a particular lease is generally set forth in the lease
auction materials prepared by the MMS. The amount of the suspension, if any, is
not determined by water depth levels (as it had in the past) but rather based
upon the MMS view of the characteristics and economics of the project. For
example, projects deemed relatively secure and safe such as those near existing
transportation infrastructure may receive no royalty relief while a similar
project far away from any such infrastructure or in an area deemed more risky
may receive significant royalty relief. As a result, unlike the royalty relief
associated with deep drilling in shallow waters, there is no formulaic or
predictable means of determining in advance whether and to what extent royalty
relief would be available for a potential deepwater project.

Oil and Natural Gas Agreements

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

Operator

The projects in which the Fund has invested are operated and controlled
by unaffiliated third-party entities acting as operators (the Operators). The
Operators are responsible for drilling, administration and production
activities for leases jointly owned by working interest owners and acts on
behalf of all working interest owners under the terms of the applicable
offshore operating agreements. In certain circumstances, Operators will enter
into agreements with independent third-party subcontractors and suppliers to
provide the various services required for operating leases. Currently, the
Funds project is operated by Anadarko.

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

Insurance

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

Salvage Fund

As to projects in which the Fund owns a working interest, the Fund
deposits in a separate interest-bearing account, or a salvage fund, which is in
the nature of a sinking fund, money to help provide for the Funds
proportionate share of the cost of dismantling production platforms and
facilities, plugging and abandoning the projects, and removing the platforms,
facilities and projects in respect of each of such projects after their useful
life, in accordance with applicable federal and state laws and regulations.
There is no assurance that the salvage fund will have sufficient assets to meet
these requirements and any unfunded expenses, and the Fund may be liable for
such expenses. In 2007, the Fund deposited $1.0 million from capital
contributions into a salvage fund, which the Fund estimates to be sufficient to
meet its potential requirements. If management later determines the deposit and
earned interest is not enough to cover the Funds proportionate share of
expense, the Fund will deposit payments from operating income to make up any
differences. Any portion of a salvage fund that remains after the Fund pays its
share of the actual salvage cost will be distributed to the shareholders. There
are no legal restrictions on the withdrawal of the salvage fund.

7

---



Seasonality

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

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

The Manager has experienced the range of possible interruptions in
operations due to hurricanes from as little as no damage and insignificant or
no interruptions to significant damage and extended interruptions. However, it
is impossible to predict whether and to what extent hurricanes and damage may
occur and to what projects.

Customers

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

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

Competition

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

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

8

---



Employees

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

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 the Fund 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 (the 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.

9

---



Environmental Matters and Regulation

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

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

The
Oil Pollution Act

The Oil Pollution Act 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 Operators are responsible for compliance with the
Clean Water Act although the Fund may be liable for any failure of the
Operators 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, 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 (federal, state and local) will have a material adverse
impact on the financial condition and/or operations of the Fund.

Potential Tax Benefits

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

10

---



Deduction
of Intangible Drilling and Development Costs

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

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

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

To the extent that drilling and development services were performed for
the Fund in 2007, amounts incurred pursuant to bona fide arms-length drilling
contracts and constituting intangible drilling and development costs were
deductible by the Fund in 2007. To the extent that such services are performed
in 2008, however, the Fund will only be allowed to deduct for the year 2007
amounts that are:

| |   |                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------
| |  | incurred pursuant to bona fide arms-length drilling contracts which
  provide for absolute noncontingent liability for payment, and
| |   |                                                                                                                                     
| |  | attributable to wells spud within 90 days after December 31, 2007.                                                                  

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

| |                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | in
  determining whether an amount has been incurred with respect to any item
  during any taxable year, the all events tests shall not be treated as met any
  earlier than when economic performance with respect to such item occurs.                 
| |                                                                                                                                                                                                                                                          
| | economic
  performance with respect to the act of drilling an oil or natural gas well
  shall be treated as having occurred within a taxable year if drilling of the well
  commences before the close of the 90th day after the close of a taxable year.

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

Consequently, intangible drilling and development costs meeting the
above criteria were deducted by the Fund in 2007 even though a portion of such
costs are attributable to services performed during 2008.

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

11

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Depletion
Deductions

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

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

Percentage depletion with respect to production of oil and natural gas
is available only to those qualifying for the independent producers exemption,
and is limited to an average of 1,000 barrels per day of domestic oil
production or 6,000,000 cubic feet per day of domestic natural gas production.
The applicable rate of percentage depletion on production under the independent
producer exemption is 15% of gross income from oil and natural gas sales.

The depletion deduction under the independent producer exemption may
not exceed 65% of the taxpayers taxable income for the year, computed without
regard to certain deductions. Any percentage depletion not allowed as a
deduction due to the 65% of adjusted taxable income limitation may be carried
over to subsequent years subject to the same annual limitation. For a
shareholder that is a trust, the 65% limitation shall be computed without
deduction for distributions to beneficiaries during the taxable year.

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

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

Depreciation

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

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

|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

Not required.

|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS

Not
applicable.

12

---



|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

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

|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

None.

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

None.

PART II.

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

Market Price of Shares, Distributions and
Related Shareholder Matters

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

Participation in Costs and Revenues

The Funds investment objective is primarily to generate current cash
flow for distribution to shareholders from the operation of the Fund projects
to the extent that such distributions are consistent with the reserve
requirements and operational needs of those projects. If the Fund does make
distributions, this section describes how the Fund will:

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

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

Available
Cash from Capital Transactions is total cash received by the Fund from the
proceeds of the sale or other disposition of the Funds property (including
items such as insurance proceeds and other amounts received out of the ordinary
course of business), but excluding dispositions of temporary investments of the
Fund.

Available Cash
from Temporary Investments is cash from short-term investments (i.e. U.S.
Treasury Bills, certificates of deposits) and other interest bearing cash
accounts.

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

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

Distributions from Operations

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

13

---



Distributions of Available Cash from Capital
Transactions

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

| |   |                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Before
  shareholders have received total distributions equal to their capital
  contributions, 99% of available cash from capital transactions will be
  distributed to shareholders and 1% to the Manager.
|
| |  | After
  shareholders have received total distributions equal to their capital
  contributions, 85% of available cash from capital transactions will be
  distributed to shareholders and 15% to the Manager.

General Distribution Provisions

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

Because distributions, if any, will be dependent upon the earnings and
financial condition of the Fund, its anticipated obligations, the Managers
discretion and other factors, there can be no assurance as to the frequency or
amounts of any distributions that the Fund may make.

Return of Capital Contributions

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

Capital Accounts and Allocations

The tax consequences of an investment in the Fund to a shareholder in
the event of dissolution depend on the shareholders capital account and on the
allocations of profits and losses to that account. The Funds taxable profits
or losses are allocated among the shareholders as described below and profits
or losses are added to or subtracted from the shareholders capital accounts.
The amounts allocated to each shareholder will generally not be equal to the distributions
the shareholder receives until final liquidating distributions are made to
shareholders.

The Fund does not currently anticipate that any contributions or
distributions of property will be made. Certain additional adjustments to
capital accounts will be made if necessary to account for the effects of
non-recourse debt incurred by the Fund, if any, or contributions of property,
if any, to the Fund.

During the period August 28, 2006 (Inception) through December 31,
2007, the Fund issued an aggregate 486.4825 Shares for gross proceeds of
approximately $72.4 million. All sales of unregistered securities relied on
Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
thereunder. All of the sales were made without the use of an underwriter. All
purchasers of shares represented and warranted to the Fund that they were
accredited investors as defined in Rule 501(a) under the Securities Act and
that the Shares were being purchased for investment and not for resale.

From the amount raised, approximately $8.5 million was disbursed for
commissions and legal syndication fees. Additionally, approximately $3.3
million was paid as an investment fee to Ridgewood Energy Corporation, the
Manager, for the investigation and evaluation of investment property prospects.
Remaining funds are expected to be used for exploration and development
activities of oil and gas properties as well as the operation of the Fund.

|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

Not required.

14

---



|        |                                                                                        
|------- | ---------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS

Overview of the Funds Business

The Fund (an exploratory stage enterprise) is an independent oil and
natural gas producer. The Funds primary investment objective is to generate
cash flow for distribution to its shareholders through participation in oil and
natural gas exploration and development projects in the Gulf of Mexico. The
Fund began its operations by offering its Shares in a private offering on
October 1, 2006. As a result of such offering, which was terminated on January
19, 2007, the Fund raised approximately $72.4 million through the sale of
486.4825 shares of LLC membership interest. After the payment of approximately
$11.8 million in offering fees, commissions and investment fees to the Manager,
affiliates and broker-dealers, the Fund retained approximately $60.6 million
available for investment. Investment fees represent a one-time fee of 4.5% of
initial capital contributions. The fee was payable for the service of investigating
and evaluating investment opportunities and expensed as incurred. Since
inception in August 2006, the Fund has acquired an interest in three offshore
projects and has participated in the drilling of three wells. The Fund was
notified by project operators that two of the projects resulted in dry holes.
See also Item 1. Business.

The Manager performs certain duties on the Funds
behalf including the evaluation of potential projects for investment and
ongoing administrative and advisory services associated with these projects.
The Fund does not currently, nor is there any plan to, operate any project in
which the Fund participates. The Manager enters into operating agreements with
third-party operators for the management of all exploration, development and
producing operations, as appropriate. As compensation for the above duties, the
Manager was paid a one-time investment fee (4.5% of capital raised) for the
evaluation of projects on the Funds behalf and an annual management fee (2.5%
of capital contributions, net of cumulative dry-hole costs), payable monthly,
for ongoing administrative and advisory duties as well as reimbursement of
expenses. The Manager also participates in distributions. See also Item 1.
Business.

Once one of the Funds projects begins generating revenue, these
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

Critical Accounting Estimates

The discussion and analysis of the Funds financial condition and
results of operations are based upon its consolidated financial statements,
which have been prepared in conformity with accounting policies generally
accepted in the United States (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  Summary of Significant Accounting Policies of Item 8. Financial
Statements and Supplementary Data contained in this Annual Report for a
discussion of the Funds significant accounting policies.

Accounting for
Exploration and Development Costs

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

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

Proved Reserves

The Fund plans to engage an independent petroleum engineer to perform a
comprehensive study of the Funds proved, or 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 natural gas and oil which geological and engineering data
demonstrate, with reasonable certainty, to be recoverable in future years from
known reservoirs under existing economic and operating conditions. However,
there are numerous uncertainties inherent in estimating quantities of proved
reserves and in projecting future revenues, rates of production and timing of
development expenditures, including many factors beyond the Funds control. The
estimation process is very complex and relies on assumptions and subjective
interpretations of available geologic, geophysical, engineering and production
data and the accuracy of reserve estimates is a function of the quality and
quantity of available data, engineering and geological interpretation, and
judgment. In addition, as a result of volatility and changing market
conditions, commodity prices and future development costs will change from
period to period, causing estimates of proved reserves and future net revenue
to change. For the period from August 2006 (Inception) through December 31,
2007, the Fund did not have any proved reserves. Estimates of proved reserves
are key components of the Funds most significant financial estimates involving
its rate for recording depreciation, depletion and amortization.

15

---



Unproved Properties

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

Asset Retirement
Obligations

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

Impairment of
Long-Lived Assets

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

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

Results of Operations

The following represents a review of operations for the year ended
December 31, 2007, for the period August 28, 2006 (Inception) through December 31,
2006 and for the period August 28, 2006 (Inception) through December 31, 2007. As
the Funds inception was August 28, 2006, the results of operations below
reflect non-comparable periods of approximately four months as compared to
twelve months. In addition, as a result of the private placement offering which
commenced in October 2006, there were certain one-time costs, the majority of
which were incurred in 2006. The following table summarizes the Funds results
of operations, and should be read in conjunction with the Funds financial
statements and the notes thereto included within Item 8. Financial Statements
and Supplementary Data contained in this Annual Report.

16

---



|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|---------------------------------------- |  | ----------------------------- | ------ | ----------------------------------------------------------------------- | - | ---------------------------------------------------------------------- | - | - | ------- | -
|(in thousands)                           |  | Year ended
 December 31, 2007 |        | For the period
 August 28, 2006
 (Inception) through
 December 31, 2006 |   | For the period August 28,
 2006 (Inception) through
 December 31, 2007 |  
|                                         |  |                               |        |                                                                         |   |                                                                        |  
|Revenue                                  |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Oil and gas revenue                      |  | $                             |       |                                                                         | $ |                                                                       |   | $ |        |  
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Expenses                                 |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Dry-hole costs                           |  |                               | 3,964  |                                                                         |   | 7,749                                                                  |   |   | 11,713  |  
|Investment fees to affiliate             |  |                               | 20     |                                                                         |   | 3,252                                                                  |   |   | 3,272   |  
|Management fees to affiliate             |  |                               | 1,534  |                                                                         |   | 253                                                                    |   |   | 1,787   |  
|General and administrative expenses      |  |                               | 453    |                                                                         |   | 328                                                                    |   |   | 781     |  
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Total expenses                           |  |                               | 5,971  |                                                                         |   | 11,582                                                                 |   |   | 17,553  |  
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Loss from operations                     |  |                               | (5,971 | )                                                                       |   | (11,582                                                                | ) |   | (17,553 | )
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Other
 income                            |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Interest income                          |  |                               | 2,174  |                                                                         |   | 235                                                                    |   |   | 2,409   |  
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Net loss                                 |  |                               | (3,797 | )                                                                       |   | (11,347                                                                | ) |   | (15,144 | )
|Other
 comprehensive income              |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|Unrealized gain on marketable securities |  |                               | 16     |                                                                         |   |                                                                       |   |   | 16      |  
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  
|                                        
|Total comprehensive loss                 |  | $                             | (3,781 | )                                                                       | $ | (11,347                                                                | ) | $ | (15,128 | )
|                                         |  |                               |        |                                                                         |   |                                                                        |   |   |         |  

Year Ended December 31, 2007 Compared to
the Period August 28, 2006 (Inception) through December 31, 2006 and the Period
August 28, 2006 (Inception) through December 31, 2007

Operating Revenue

From inception of the Fund
in August 2006 through December 31, 2007, the Fund has not recorded any
operating revenue and is considered an exploratory stage enterprise.

Operating and Other Expenses

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

|                        |  |                               |       |                                                                         |   |                                                                         |  |   |        | 
|----------------------- |  | ----------------------------- | ----- | ----------------------------------------------------------------------- | - | ----------------------------------------------------------------------- |  | - | ------ | 
|                        |  | Year ended
 December 31, 2007 |       | For the period
 August 28, 2006
 (Inception) through
 December 31, 2006 |   | For the period
 August 28, 2006
 (Inception) through
 December 31, 2007 | 
|                        |  |                               |       |                                                                         |   |                                                                         | 
|                        |  |                               |       |                                                                         |   | (in thousands)                                                          |  |   |        | 
|Lease Block             |  |                               |       |                                                                         |   |                                                                         |  |   |        | 
|South Timbalier 135/136 |  | $                             | 2,546 |                                                                         | $ | 7,749                                                                   |  | $ | 10,295 | 
|Eugene Island 255/256   |  |                               | 1,418 |                                                                         |   |                                                                        |  |   | 1,418  | 
|                        |  |                               |       |                                                                         |   |                                                                         |  |   |        | 
|                        |  | $                             | 3,964 |                                                                         | $ | 7,749                                                                   |  | $ | 11,713 | 
|                        |  |                               |       |                                                                         |   |                                                                         |  |   |        | 

Investment Fees. For the year ended December 31, 2007, for
the period August 28, 2006 (Inception) through December 31, 2006, and for the
period August 28, 2006 (Inception) through December 31, 2007, investment fees
incurred were $20 thousand, $3.3 million and $3.3 million, respectively. The
Manager was paid a one-time investment fee of 4.5% of initial capital
contributions. The fee was payable for the service of investigating and evaluating
investment opportunities and affecting transactions and were expensed as
incurred.

17

---



Management Fees.Management fees for the year ended December
31, 2007, for the period August 28, 2006 (Inception) through December 31, 2006,
and for the period August 28, 2006 (Inception) through December 31, 2007, were
$1.5 million, $0.3 million and $1.8 million, respectively. The Manager receives
an annual management fee, payable monthly, which is equal to 2.5% of the total
shareholder capital contributions. Commencing in January 1, 2007, the
management fee, was reduced by the cumulative dry-hole expenses incurred by the
Fund. These fees are to cover expenses associated with overhead incurred by the
Manager for its ongoing management, administrative and advisory services. Such
overhead expenses include but are not limited to rent, payroll and benefits for
employees of the Manager, and other administrative costs. The increase in the
management fees from the period August 28, 2006 (Inception) through December 31,
2006 as compared to the year ended December 31, 2007 is the result of
additional capital raised, and the difference between a four month period in
2006 as compared to a twelve month period for 2007.

General and Administrative Expenses.

Accounting, legal, fiduciary
fees and insurance expenses represent costs specifically identifiable or
allocable to the Fund. The following table summarizes general and
administrative expenses.

|                                      |  |                               |     |                                                                         |                |                                                                         |  |   |     | 
|------------------------------------- |  | ----------------------------- | --- | ----------------------------------------------------------------------- | -------------- | ----------------------------------------------------------------------- |  | - | --- | 
|                                      |  | Year ended
 December 31, 2007 |     | For the period
 August 28, 2006
 (Inception) through
 December 31, 2006 |                | For the period
 August 28, 2006
 (Inception) through
 December 31, 2007 | 
|                                      |  |                               |     |                                                                         |                |                                                                         | 
|                                      |  |                               |     |                                                                         | (in thousands) |                                                                         |  |   |    
|General
 and administrative expenses: |  |                               |     |                                                                         |                |                                                                         |  |   |    
|Accounting and legal fees             |  | $                             | 137 |                                                                         | $              | 80                                                                      |  | $ | 217 | 
|Insurance                             |  |                               | 274 |                                                                         |                | 242                                                                     |  |   | 516 | 
|Trust fees                            |  |                               | 41  |                                                                         |                |                                                                        |  |   | 41  | 
|Other                                 |  |                               | 1   |                                                                         |                | 6                                                                       |  |   | 7   | 
|                                      |  |                               |     |                                                                         |                |                                                                         |  |   |     | 
|                                      |  | $                             | 453 |                                                                         | $              | 328                                                                     |  | $ | 781 | 
|                                      |  |                               |     |                                                                         |                |                                                                         |  |   |     | 

Accounting and legal fees
represent annual audit and tax preparation fees, quarterly reviews and filing
fees of the Fund and have increased since 2006 due to additional SEC filing
requirements once the Fund became effective in 2007. Insurance expense
represents premiums related to well control insurance and directors and
officers liability policy and are allocated by the Manager to the Fund based on
capital raised by the Fund to total capital raised by all oil and natural gas
funds managed by the Manager. Trust fees represent bank fees associated with
the management of the Funds short-term and long-term investment portfolios in
US Treasury securities which were opened in 2007.

Interest Income.Interest income represents interest earned on
money market accounts and short-term and long-term US Treasury securities.
Interest income for the year ended December 31, 2007, for the period August 28,
2006 (Inception) through December 31, 2006, and for the period August 28, 2006
(Inception) through December 31, 2007, were $2.2 million, $0.2 million and $2.4
million, respectively. The increase in interest income from the period August
28, 2006 (Inception) through December 31, 2006 as compared to the year ending
December 31, 2007 is the result of an increase in capital raised, as well as a
full year of interest income earned in 2007 as compared to four months in 2006.

Capital Resources and Liquidity

Operating Cash Flows

Cash flows used in operating
activities for the year ended December 31, 2007 were $0.2 million. These
expenditures primarily related to payments for investment fees, management fees
and general and administrative expenses of $0.4 million, $1.5 million and $0.5
million, respectively, 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,
2006 were $3.2 million. These expenditures primarily related to payments for
investment fees, management fees and general and administrative expenses of
$2.9 million, $0.2 million and $0.3 million, respectively, offset by interest
income received of $0.1 million and favorable working capital of $0.1 million.

Cash flows used in operating
activities for the period August 28, 2006 (Inception) through December 31, 2007
were $3.5 million. These expenditures primarily related to payments for
investment fees, management fees and general and administrative expenses of
$3.3 million, $1.8 million and $0.8 million, respectively, offset by interest
income received of $2.3 million and favorable working capital of $0.1 million.

18

---



Investing Cash Flows

Cash flows used in investing
activities for the year ended December 31, 2007 were $47.0 million, which
relate to expenditures for properties of $19.2 million, investment in the
salvage fund of $1.0 million, investment in short-term marketable securities of
$12.0 million and investment in long-term marketable securities of $14.7
million.

There was no cash flow used
or provided by investing activities for the period August 28, 2006 (Inception)
through December 31, 2006.

Cash flows used in investing
activities for the period August 28, 2006 (Inception) through December 31,
2007 were $47.0 million, which relate to expenditures for properties of $19.2
million, investment in the salvage fund of $1.0 million, investment in
short-term marketable securities of $12.0 million and investment in long-term
marketable securities of $14.7 million

Financing Cash Flows

Cash flows provided by
financing activities for the year ended December 31, 2007 were $2.2 million.
These primarily related to cash receipts obtained from the Funds private
offering of $3.3 million, which were offset by payments for syndication costs
of $1.1 million.

Cash flows provided by
financing activities for the period August 28, 2006 (Inception) through
December 31, 2006 were $61.7 million. These primarily related to cash receipts
obtained from the Funds private offering of $69.1 million, which were
partially offset by payments for syndication costs of $7.4 million.

Cash flows provided by
financing activities for the period from August 28, 2006 (Inception) through
December 31, 2007 were $63.8 million. These primarily related to cash receipts
obtained from the Funds private offering of $72.4 million, which were
partially offset by payments for syndication costs of $8.5 million.

Estimated Capital Expenditures

The Fund has entered into
multiple offshore operating agreements for the drilling and development of its
investment properties. The estimated capital expenditures associated with these
agreements can vary depending on the stage of development on a
property-by-property basis. As of December 31, 2007, such estimated capital
expenditures to be spent totaled approximately $52 million, a portion of
which relates to the further development of the Funds Walker Ridge 155
property. In accordance with the Funds LLC Agreement, if Walker Ridge is
determined to be a commercial success, the Manager anticipates an additional
capital call to raise approximately $33.1 million to drill four more wells,
which will cover these expenditures. Any remaining unspent development capital
will be reallocated to one or more new unspecified projects.

Liquidity Needs

The Funds primary
short-term liquidity needs are to fund its 2008 operations, including
management fees and capital expenditures, with existing cash on-hand and income
earned from its short-term investments and cash and cash equivalents. The
Manager is entitled to receive an annual management fee from the Fund
regardless of whether the Fund is profitable in that year. The annual fee,
payable monthly, is equal to 2.5% of total capital contributed by shareholders,
net of cumulative dry-hole costs.

With respect to the payment
of management fees, until one of the Funds projects begins producing, all or a
portion of the management fee is paid generally from the interest or dividend
income generated by the Funds development capital that has not been spent,
although the management fee can be paid out of capital contributions. Such
interest and/or dividend income is expected to be sufficient to cover Fund
expenses, including the management fee. However in periods of declining interest
rates, and as the Fund expends its capital on projects, interest and/or
dividend income may not be sufficient, which would require the Fund to use
capital contributions to fund such expenses. Generally, it can take anywhere
from 18 to 24 months to bring a project to production. Once a well is on
production, the management fee and fund expenses are paid from operating
income. Over time, as a well produces, the Fund may recover some or the entire
management fee that may have been paid out of capital contributions.

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

19

---



In addition to the capital
raised by the Fund in its private placement, the Funds LLC Agreement indicates
it may conduct another capital call to raise additional funds for the specific
investment in Walker Ridge 155. The number of projects in which the Fund can
invest will naturally be limited and each unsuccessful project the Fund
experiences, if any, will not only reduce its ability to generate revenue, but
also exhaust its limited supply of capital. Typically for a fund, the Manager
seeks an investment portfolio that combines high and low risk exploratory
projects.

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

Off-Balance Sheet Arrangements

The Fund had no off-balance
sheet arrangements as of December 31, 2007 and December 31, 2006 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 discuss or negotiate any such
contracts. No contractual obligations exist at December 31, 2007 and December
31, 2006.

|         |                                                            
|-------- | -----------------------------------------------------------
|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 and filed as part of this report.

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

None.

|         |                         
|-------- | ------------------------
|ITEM 9A. | CONTROLS
 AND PROCEDURES

Disclosure Controls and Procedures

Under 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, 2007. 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 Reporting

Management 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, 2007. 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.

20

---



Based on their assessment
using those criteria, management of the Fund concluded that, as of December 31,
2007, 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
Reporting

The 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, 2007 that have materially affected, or are
reasonably likely to materially affect, the Funds internal control over
financial reporting.

|         |                   
|-------- | ------------------
|ITEM 9B. | OTHER
 INFORMATION

None.

PART III

|         |                                                        
|-------- | -------------------------------------------------------
|ITEM 10. | DIRECTORS,
 EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The Fund has engaged
Ridgewood Energy Corporation as 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, 2007 are as
follows:

|                                                              |              
|------------------------------------------------------------- | -------------
|Name, Age
 and Position with Registrant                       | Officer Since
|                                                              |              
|Robert E. Swanson, 60                                         |              
|President and Chief Executive Officer                         | 1982         
|                                                              |              
|W. Greg Tabor, 47                                             |              
|Executive Vice President and Director of Business
Development | 2004         
|                                                              |              
|Robert L. Gold, 48                                            |              
|Executive Vice President                                      | 1987         
|                                                              |              
|Kathleen P. McSherry, 42                                      |              
|Executive Vice President and Chief Financial
Officer          | 2000         
|                                                              |              
|Daniel V. Gulino, 47                                          |              
|Senior Vice President and General Counsel                     | 2003         
|                                                              |              
|Adrien Doherty, 55                                            |              
|Executive Vice President                                      | 2006         

21

---



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

Robert E. Swanson
has served as the President, Chief Executive Officer, sole director, and sole
stockholder of Ridgewood Energy since its inception. Mr. Swanson is also the
controlling member of Ridgewood 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.

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

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

Kathleen P. McSherry
has served as the 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.

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.

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 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.

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.

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, 2007, all filing requirements applicable to its officers, directors and 10%
beneficial owners were met.

22

---



|         |                       
|-------- | ----------------------
|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 February 19, 2008 (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 February 19, 2008. Other
than the below, no officer and director owns any of the Funds Shares.

|                                                              |  |  |                   |  |  |         | 
|------------------------------------------------------------- |  |  | ----------------- |  |  | ------- | 
|Name of beneficial owner                                      |  |  | Number
 of shares |  |  | Percent | 
|                                                              |  |  |                   |  | 
|Robert E.
 Swanson (1), President and Chief Executive Officer |  |  | 1.0000            |  |  | *       | 
|Executive
 officers as a group (1)                            |  |  | 1.0000            |  |  | *       | 

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

|         |                                                                          
|-------- | -------------------------------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
 INDEPENDENCE

In 2007 and
2006, Ridgewood Energy Corporation, the Manager, was paid a one-time investment
fee of 4.5% of capital contributions. These fees were payable for services
provided by the Manager of locating, investigating and evaluating investment
opportunities and expensed as incurred. For the year ended December 31, 2007,
for the period August 28, 2006 (Inception) through December 31, 2006, and for the
period August 28, 2006 (Inception) through December 31, 2007, investment fees
were approximately $20 thousand, $3.3 million and $3.3 million, respectively.
Of this amount, approximately $0.4 million were included in due to affiliates
at December 31, 2006. There were no investment fees payable at December 31,
2007.

The Funds LLC
Agreement provides that the Manager render management, administrative and
advisory services. For such services, the Manager receives an annual management
fee, payable monthly, of 2.5% of total capital contributions net of cumulative
dry-hole costs. In 2007, the Manager changed its policy regarding the
management fee calculation, and netted cumulative dry-hole costs against the
total capital contributions, thus reducing its annual fee on a go-forward
basis. Management fees of approximately $1.5 million, $0.3 million and $1.8
million were incurred and paid for the year ended December 31, 2007, for the period
August 28, 2006 (Inception) through December 31, 2006 and for the period August
28, 2006 (Inception) through December 31, 2007, respectively. Of this amount
approximately $1 thousand and $52 thousand were included in due to affiliates
at December 31, 2007 and 2006, respectively.

The Manager
was paid an offering fee approximating 3.5% of capital contributions to cover
expenses incurred in the offer and sale of shares of the Fund. Such offering
fee was included in syndication costs. For the period August 28, 2006
(Inception) through December 31, 2006, offering fees were approximately $2.5
million. Of this amount approximately $1 thousand and $0.3 million were
included in due to affiliates at December 31, 2007 and 2006, respectively.

From time to
time, short-term payables and receivables, which do not bear interest, arise
from transactions with affiliates in the ordinary course of business. As of
December 31, 2007 and 2006, there was no outstanding payables or receivables
related to these transactions.

Ridgewood
Securities Corporation, a registered broker-dealer affiliated with the Manager,
earned selling commissions and placement fees of approximately $5 thousand,
$0.8 million, and $0.8 million for the year ended December 31, 2007, for the period
August 28, 2006 (Inception) through December 31, 2006 and for the period August 28,
2006 (Inception) through December 31, 2007, respectively, for shares of the
Fund sold, which are reflected in syndication costs of approximately $8.5
million. At December 31, 2007 and 2006, nil and $87 thousand, respectively,
were included in due to affiliates.

23

---



There have
been no distributions for the period August 28, 2006 (Inception) through
December 31, 2007.

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

|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following
table presents fees and services rendered by Deloitte and Touche, LLP for the
year ended December 31, 2007 and for the period August 28, 2006 (Inception) through
December 31, 2006.

|               |  |                             |     |                                                                         |   |    | 
|-------------- |  | --------------------------- | --- | ----------------------------------------------------------------------- | - | -- | 
|               |  | Year endedDecember
 31,2007 |     | For the period August
 28, 2006 (Inception)
 through December 31,
 2006 |  
|               |  |                             |     |                                                                         |  
|               |  | (in thousands)              |    
|Audit Fees (1) |  | $                           | 125 |                                                                         | $ | 40 | 
|Tax fees (2)   |  |                             |    |                                                                         |   | 15 | 
|               |  |                             |     |                                                                         |   |    | 
|Total          |  | $                           | 125 |                                                                         | $ | 55 | 
|               |  |                             |     |                                                                         |   |    | 

|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Fees for
 audit of annual financial statements, reviews of the related quarterly
 financial statements, and reviews of documents filed with
 the SEC.
|    |                                                                                                                                                      
|(2) | Fees related
 to professional services for tax compliance, tax advice and tax planning.                                                              

PART IV.

|                                                            |                                            
|----------------------------------------------------------- | -------------------------------------------
|ITEM 15.                                                    | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|                                                            |                                            
|(a) (1)                                                     | Financial Statements                       
|                                                            |                                            
|See Index
 to Financial Statements set forth on page F-1.
|                                                            |                                            
|(a) (2)                                                     | Financial Statement Schedules              
|                                                            |                                            
|None.                                                      

24

---



|             |   |                                                                                                                                                                                                                                                                                            
|------------ | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
 No. |   | Description                                                                                                                                                                                                                                                                                
|             |   |                                                                                                                                                                                                                                                                                            
|            
|10.1         |   | Participation Agreement
 between Helis Oil & Gas Company, L.L.C. and Ridgewood Energy Corporation
 as Manager for Eugene Island 255/256 dated April 24, 2007 (incorporated by
 reference to Exhibit 10.1 to the Funds Quarterly Report on Form 10-Q filed
 with the SEC on June 22, 2007).
|             |   |                                                                                                                                                                                                                                                                                            
|10.2         |   | Participation Agreement
 between Kerr-McGee Oil & Gas Corporation and Ridgewood Energy Corporation
 as Manager for Walker Ridge 155, dated March 1, 2007 (incorporated by
 reference to Exhibit 10.2 to the Funds Quarterly Report on Form 10-Q filed
 with the SEC on November 7, 2007). 
|             |   |                                                                                                                                                                                                                                                                                            
|31.1         | * | Certification of Robert E.
 Swanson, Chief Executive Officer, pursuant to Securities Exchange Act Rule
 13a-14(a)                                                                                                                                                                          
|             |   |                                                                                                                                                                                                                                                                                            
|31.2         | * | Certification of Kathleen
 P. McSherry, Chief Financial Officer, pursuant to Securities Exchange Act
 Rule 13a-14(a)                                                                                                                                                                       
|             |   |                                                                                                                                                                                                                                                                                            
|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 Company and Kathleen P. McSherry, Chief Financial Officer of
 the Company.                         

25

---



|                                                                                                                                                                                                                                              |  |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | 
|INDEX TO FINANCIAL STATEMENTS                                                                                                                                                                                                                 |  | PAGE
|                                                                                                                                                                                                                                              |  |      | 
|Report of Independent Registered Public Accounting Firm                                                                                                                                                                                       |  | F-2  | 
|                                                                                                                                                                                                                                              |  |      | 
|Balance Sheets as of December 31, 2007 and 2006                                                                                                                                                                                               |  | F-3  | 
|                                                                                                                                                                                                                                              |  |      | 
|Statements of Operations and Other Comprehensive Loss for the year
 ended December 31, 2007, for the period August 28, 2006 (Inception) through
 December 31, 2006, and for the period August 28, 2006 (Inception) through
 December 31, 2007 |  | F-4  | 
|                                                                                                                                                                                                                                              |  |      | 
|Statements of Changes in Members Capital for the year ended December
 31, 2007, and for the period August 28, 2006 (Inception) through December 31,
 2006                                                                                    |  | F-5  | 
|                                                                                                                                                                                                                                              |  |      | 
|Statements of Cash Flows for the year ended December 31, 2007, for
 the period August 28, 2006 (Inception) through December 31, 2006, and for the
 period August 28, 2006 (Inception) through December 31, 2007                               |  | F-6  | 
|                                                                                                                                                                                                                                              |  |      | 
|Notes to Financial Statements                                                                                                                                                                                                                 |  | F-7  | 
|                                                                                                                                                                                                                                              |  |      | 
|Supplementary Financial Information  Information about Oil and Natural 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, 2007 and 2006,
the related statements of operations and other comprehensive loss and cash
flows for the year ended December 31, 2007, for the period August 28, 2006
(Inception) through December 31, 2006 and for the period August 28, 2006
(Inception) through December 31, 2007 and related statement of changes in
members capital for the year ended December 31, 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 the 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, 2007
and 2006, and the results of operations and cash flows for the year ended
December 31, 2007, for the period August 28, 2006 (Inception) through December
31, 2006 and for the period August 28, 2006 (Inception) through December 31,
2007, in conformity with accounting principles generally accepted in the United
States of America.

|                             | 
|---------------------------- | 
|/s/ Deloitte
 and Touche LLP | 
|                             | 
|February 20,
 2008           | 
|Parsippany,
 New Jersey      | 

F-2

---



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

|                                                 |  |              |         |      |   |         |  
|------------------------------------------------ |  | ------------ | ------- | ---- | - | ------- | -
|                                                 |  | December 31, |        
|                                                 |  | 2007         |         | 2006 |  
|                                                 |  |              |         |      |  
|ASSETS                                           |  |              |         |      |   |         |  
|Current assets:                                  |  |              |         |      |   |         |  
|Cash and cash equivalents                        |  | $            | 13,316  |      | $ | 58,433  |  
|Short-term investments in marketable
securities  |  |              | 12,020  |      |   |        |  
|Other current assets                             |  |              | 118     |      |   | 154     |  
|                                                 |  |              |         |      |   |         |  
|Total current assets                             |  |              | 25,454  |      |   | 58,587  |  
|                                                 |  |              |         |      |   |         |  
|                                                 |  |              |         |      |   |         |  
|Salvage
 fund                                    |  |              | 1,033   |      |   |        |  
|Long-term
 investments in marketable securities  |  |              | 14,742  |      |   |        |  
|                                                 |  |              |         |      |   |         |  
|Oil
 and gas properties                          |  |              |         |      |   |         |  
|Unproved properties                              |  |              | 7,542   |      |   |        |  
|                                                 |  |              |         |      |   |         |  
|Total oil and gas properties                     |  |              | 7,542   |      |   |        |  
|                                                 |  |              |         |      |   |         |  
|Total assets                                     |  | $            | 48,771  |      | $ | 58,587  |  
|                                                 |  |              |         |      |   |         |  
|LIABILITIES AND MEMBERS
CAPITAL                 |  |              |         |      |   |         |  
|Current
 liabilities:                            |  |              |         |      |   |         |  
|Due to affiliate (Note 6)                        |  | $            | 2       |      | $ | 837     |  
|Due to operator                                  |  |              | 10      |      |   | 7,749   |  
|Accrued expenses payable                         |  |              | 70      |      |   | 732     |  
|                                                 |  |              |         |      |   |         |  
|Total current liabilities                        |  |              | 82      |      |   | 9,318   |  
|                                                 |  |              |         |      |   |         |  
|                                                
|Commitments
 and contingencies (Note 8)          |  |              |         |      |   |         |  
|                                                
|Members
 capital:                               |  |              |         |      |   |         |  
|Manager:                                         |  |              |         |      |   |         |  
|Deficit accumulated during the exploratory
stage |  |              | (472    | )    |   | (162    | )
|                                                 |  |              |         |      |   |         |  
|Managers total                                  |  |              | (472    | )    |   | (162    | )
|                                                 |  |              |         |      |   |         |  
|Shareholders:                                    |  |              |         |      |   |         |  
|Capital contributions (1,000 shares
authorized;  |  |              |         |      |   |         |  
|486.4825 and 483.4529 issued and
outstanding     |  |              |         |      |   |         |  
|at December 31, 2007 and 2006,
respectively)     |  |              | 72,381  |      |   | 71,923  |  
|Syndication costs                                |  |              | (8,541  | )    |   | (8,480  | )
|Subscription receivable                          |  |              | (23     | )    |   | (2,827  | )
|Deficit accumulated during the exploratory
stage |  |              | (14,672 | )    |   | (11,185 | )
|Accumulated other comprehensive income           |  |              | 16      |      |   |        |  
|                                                 |  |              |         |      |   |         |  
|Shareholders total                              |  |              | 49,161  |      |   | 49,431  |  
|                                                 |  |              |         |      |   |         |  
|Total members capital                           |  |              | 48,689  |      |   | 49,269  |  
|                                                 |  |              |         |      |   |         |  
|Total liabilities and members
capital           |  | $            | 48,771  |      | $ | 58,587  |  
|                                                 |  |              |         |      |   |         |  

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 OTHER COMPREHENSIVE LOSS
(in thousands, except share amounts)

|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|---------------------------------------- |  | ------------------------------ | ------ | ----------------------------------------------------------------- | - | ----------------------------------------------------------------- | - | - | ------- | -
|                                         |  | Year ended 
 December 31, 2007 |        | For the periodAugust 28, 2006(Inception) throughDecember 31, 2006 |   | For the periodAugust 28, 2006(Inception) throughDecember 31, 2007 |  
|                                         |  |                                |        |                                                                   |   |                                                                   |  
|                                        
|Revenue                                  |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Oil and gas revenue                      |  | $                              |       |                                                                   | $ |                                                                  |   | $ |        |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Expenses                                 |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Dry-hole costs                           |  |                                | 3,964  |                                                                   |   | 7,749                                                             |   |   | 11,713  |  
|Investment fees to affiliate (Note 6)    |  |                                | 20     |                                                                   |   | 3,252                                                             |   |   | 3,272   |  
|Management fees to affiliate (Note 6)    |  |                                | 1,534  |                                                                   |   | 253                                                               |   |   | 1,787   |  
|General and administrative expenses      |  |                                | 453    |                                                                   |   | 328                                                               |   |   | 781     |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Total expenses                           |  |                                | 5,971  |                                                                   |   | 11,582                                                            |   |   | 17,553  |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Loss from operations                     |  |                                | (5,971 | )                                                                 |   | (11,582                                                           | ) |   | (17,553 | )
|Other
 income                            |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Interest income                          |  |                                | 2,174  |                                                                   |   | 235                                                               |   |   | 2,409   |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Net loss                                 |  |                                | (3,797 | )                                                                 |   | (11,347                                                           | ) |   | (15,144 | )
|Other
 comprehensive income              |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Unrealized gain on marketable securities |  |                                | 16     |                                                                   |   |                                                                  |   |   | 16      |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Total comprehensive loss                 |  | $                              | (3,781 | )                                                                 | $ | (11,347                                                           | ) | $ | (15,128 | )
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Manager Interest                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Net loss                                 |  | $                              | (310   | )                                                                 | $ | (162                                                              | ) | $ | (472    | )
|                                         |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Shareholder Interest                     |  |                                |        |                                                                   |   |                                                                   |   |   |         |  
|Net loss                                 |  | $                              | (3,487 | )                                                                 | $ | (11,185                                                           | ) | $ | (14,672 | )
|Net loss per share                       |  | $                              | (7,168 | )                                                                 | $ | (23,135                                                           | ) | $ | (30,159 | )

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 amounts)

|                                                                                                                                                                                                |  |             |          |         |   |              |   |       |         |   |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------- | -------- | ------- | - | ------------ | - | ----- | ------- | - | - | ------- | -
|                                                                                                                                                                                                |  | # of Shares |          | Manager |   | Shareholders |   | 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 selling 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         | ) | $     | 49,161  |   | $ | 48,689  |  
|                                                                                                                                                                                                |  |             |          |         |   |              |   |       |         |   |   |         |  

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)

|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|------------------------------------------------------------------------------------------ |  | ----------------------------- | ------- | ----------------------------------------------------------------- | - | ----------------------------------------------------------------- | - | - | ------- | -
|                                                                                           |  | Year ended
 December 31, 2007 |         | For the periodAugust 28, 2006(Inception) throughDecember 31, 2006 |   | For the periodAugust 28, 2006(Inception) throughDecember 31, 2007 |  
|                                                                                           |  |                               |         |                                                                  
|                                                                                           |  |                               |         |                                                                  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |  
|Cash flows
 from operating activities                                                      |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Net loss                                                                                   |  | $                             | (3,797  | )                                                                 | $ | (11,347                                                           | ) | $ | (15,144 | )
|Adjustments to reconcile net loss to net cash used
in operating
 activities                |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Dry-hole costs                                                                             |  |                               | 3,964   |                                                                   |   | 7,749                                                             |   |   | 11,713  |  
|Amortization of premium on investment                                                      |  |                               | 3       |                                                                   |   |                                                                  |   |   | 3       |  
|Changes in assets and liabilities:                                                         |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Decrease
(increase) in other current
 assets                                               |  |                               | 36      |                                                                   |   | (154                                                              | ) |   | (118    | )
|(Decrease) increase in due to affiliate                                                    |  |                               | (443    | )                                                                 |   | 445                                                               |   |   | 1       |  
|(Decrease) increase in accrued expenses
payable                                            |  |                               | (10     | )                                                                 |   | 80                                                                |   |   | 70      |  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|                                                                                          
|Net cash used in operating activities                                                      |  |                               | (247    | )                                                                 |   | (3,227                                                            | ) |   | (3,475  | )
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Cash flows
 from investing activities                                                      |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Capital expenditures for oil and gas
properties                                            |  |                               | (19,245 | )                                                                 |   |                                                                  |   |   | (19,245 | )
|Funding of salvage fund                                                                    |  |                               | (1,033  | )                                                                 |   |                                                                  |   |   | (1,033  | )
|Investment in held-to-maturity securities                                                  |  |                               | (12,020 | )                                                                 |   |                                                                  |   |   | (12,020 | )
|Investment in available-for-sale
securities                                                |  |                               | (14,729 | )                                                                 |   |                                                                  |   |   | (14,729 | )
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Net cash used in investing activities                                                      |  |                               | (47,027 | )                                                                 |   |                                                                  |   |   | (47,027 | )
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Cash flows from financing activities                                                       |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Contributions from shareholders                                                            |  |                               | 3,262   |                                                                   |   | 69,096                                                            |   |   | 72,358  |  
|Syndication costs paid                                                                     |  |                               | (1,105  | )                                                                 |   | (7,436                                                            | ) |   | (8,540  | )
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|                                                                                          
|Net cash provided by financing activities                                                  |  |                               | 2,157   |                                                                   |   | 61,660                                                            |   |   | 63,818  |  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Net (decrease) increase in cash and cash
equivalents                                       |  |                               | (45,117 | )                                                                 |   | 58,433                                                            |   |   | 13,316  |  
|Cash and cash equivalents, beginning of
period                                             |  |                               | 58,433  |                                                                   |   |                                                                  |   |   |        |  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Cash and cash equivalents, end of period                                                   |  | $                             | 13,316  |                                                                   | $ | 58,433                                                            |   | $ | 13,316  |  
|                                                                                           |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|                                                                                          
|Supplemental
 schedule of non-cash investing activities                                    |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Accrual for capital
 expenditures in oil and gas properties reclassified to dry-hole costs |  | $                             |        |                                                                   | $ | 7,749                                                             |   | $ |        |  
|                                                                                          
|Supplemental
 schedule of non-cash financing activities                                    |  |                               |         |                                                                   |   |                                                                   |   |   |         |  
|Subscriptions receivable                                                                   |  | $                             | 23      |                                                                   | $ | 2,827                                                             |   | $ | 23      |  
|Accrual for syndication costs                                                              |  | $                             | 1       |                                                                   | $ | 1,044                                                             |   | $ | 1       |  

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 as of
October 1, 2006 by and among Ridgewood Energy Corporation (the Manager), and
the shareholders of the Fund. Although the date of formation is August 28,
2006, the Fund did not begin operations until October 1, 2006 when it began its
private offering of shares of LLC member interest (the Shares). The offering was terminated
on January 19, 2007.

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

The Manager
performs (or arranges for the performance of) the management, administrative
and advisory 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
Enterprise

Management uses various
criteria to evaluate whether the Fund is an exploratory stage enterprise,
including but not limited to, the success of drilling, the timing, significance,
quality and flow of production and the results of reserve reports obtained from
experts. On a case by case basis, once a project begins production, management
performs diligent analysis at regular intervals utilizing the various criteria
noted above to determine the appropriate classification of the Fund as an
exploratory state entity. Based on such analysis, management has determined the
Fund continues to be an exploratory stage enterprise.

Use of Estimates

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

Cash and Cash
Equivalents

All highly liquid investments
with maturities when purchased of three months or less are considered as cash
and cash equivalents. At times, bank deposits may be in excess of federal
insured limits. At December 31, 2007 and 2006, bank balances inclusive of the
salvage fund exceeded federally insured limits by approximately $0.1 million
and $58.2 million, respectively. Cash and cash equivalents of approximately
$13.0 million and nil are investments in three month US Treasury Bills at
December 31, 2007 and 2006, respectively.

Investments in
Marketable Securities

At times the Fund may invest in
United States Treasury Bills and Notes. These investments are considered
short-term when their maturities are greater than three months and less than
one year and long-term when their maturities are in excess of twelve months.
The Fund currently has short-term investments that are classified as
held-to-maturity. Held-to-maturity securities are those investments 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 approximate fair value. At December 31, 2007, the Fund had short-term
held-to-maturity investments, inclusive of salvage fund of $1.0 million,
totaling $13.1 million, maturing in May and June 2008.

F-7

---



The Fund
currently has long-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
long-term, available-for-sale investments at December 31, 2007:

|                    |  |      |                |                            |   |              |  |   |        | 
|------------------- |  | ---- | -------------- | -------------------------- | - | ------------ |  | - | ------ | 
|                    |  | Cost |                | Gross
  Unrealized
  Gains |   | Fair
  Value | 
|                    |  |      |                |                            |   |              | 
|Available-for-Sale  |  |      | (in thousands) |                           
|                    |  |      |                |                            |   |              |  |   |        | 
|U.S. Treasury Notes |  | $    | 14,726         |                            | $ | 16           |  | $ | 14,742 | 

There were no
available-for-sale investments, short or long-term, at December 31, 2006.

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 Fund

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

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

Oil and Natural Gas
Properties

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

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

Upon the sale
or retirement of a proved property, the cost and related accumulated depletion
and amortization will be eliminated from the property accounts, and the
resultant gain or loss is recognized. On the sale or retirement of an unproved
property, gain or loss on the sale is recognized. The Manager does not
currently intend to sell any of the Funds property interests.

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

As of December
31, 2007 and 2006, approximately $10 thousand and $7.7 million, respectively,
were recorded in due to operators, related to the acquisition of oil and gas
property, both successful and unsuccessful, as well as recovery efforts. The
December 31, 2007 balance was paid in the first quarter 2008.

Advances to
Operators for Working Interests and Expenditures

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

F-8

---



Asset Retirement
Obligations

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

|                                |  |                                        |      |                                                                            |   |   | 
|------------------------------- |  | -------------------------------------- | ---- | -------------------------------------------------------------------------- | - | - | 
|                                |  | For the Year Ended
  December 31, 2007 |      | For the Period
  August 28, 2006
  (Inception) through
  December 31, 2006 |  
|                                |  |                                        |      |                                                                            |  
|                                |  | (in thousands)                         |     
|Balance - Beginning of
  period |  | $                                      |     |                                                                            | $ |  | 
|Liabilities incurred            |  |                                        | 610  |                                                                            |   |  | 
|Liabilities settled             |  |                                        | (610 | )                                                                          |   |  | 
|                                |  |                                        |      |                                                                            |   |   | 
|Balance - End of period         |  | $                                      |     |                                                                            | $ |  | 
|                                |  |                                        |      |                                                                            |   |   | 

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

Syndication Costs

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

Revenue Recognition
and Production Receivable

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

Upon
production, the volume of oil and natural gas sold on the Funds behalf may
differ from the volume of oil and natural gas to which the Fund is entitled.
The Fund will account for such oil and natural gas production imbalances by the
entitlements method. Under the entitlements method, the Fund will recognize a
receivable from other working interest owners for volumes oversold by other
working interest owners, and a payable to other working interest owners for
volumes oversold by the Fund. As of December 31, 2007 and 2006, there were no
oil or natural gas balancing arrangements between the Fund and other working
interest owners.

Impairment of
Long-Lived Assets

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

Depletion and
Amortization

Depletion and amortization of
the cost of proved oil and natural gas properties are calculated using the
units-of-production method. Proved developed reserves are used as the base for
depleting the cost of successful exploratory drilling and development costs.
The sum of proved developed and proved undeveloped reserves is used as the base
for depleting (or amortizing) leasehold acquisition costs, the costs to acquire
proved properties and platform and pipeline costs. The Fund has not begun
production as of December 31, 2007 and therefore has not recorded depletion and
amortization.

F-9

---



Income Taxes

No 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
Allocation

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

3. Recent Accounting Standards

In February
2007, the Financial Accounting Standards Board (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 is applied instrument by instrument, with a few
exceptions; the decision is irrevocable; and it is applied only to entire
instruments and not to portions of instruments. The statement requires
disclosures that facilitate comparisons (a) between entities that choose
different measurement attributes for similar assets and liabilities and (b)
between assets and liabilities in the financial statements of an entity that
selects different measurement attributes for similar assets and liabilities.
SFAS No. 159 is effective for financial statements issued for fiscal years
beginning after November 15, 2007. The adoption of SFAS No. 159 will not have a
material impact on its financials. The Fund did not elect to measure exiting
assts 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 nonfinancial assets and liabilities. The Fund does not expect
this guidance to have a material impact on the financial statements.

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 the reserves. Capitalized 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. At
December 31, 2007 and 2006, the Fund had no capitalized exploratory well costs
greater than one year. The following table reflects the net changes in unproved
properties.

|                                                                                             |  |                                |        |                                                                      |   |        |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | -------------------------------------------------------------------- | - | ------ | -
|                                                                                             |  | Year ended
  December 31, 2007 |        | For the periodAugust 28, 2006(Inception) through
  December 31, 2006 |  
|                                                                                             |  |                                |        |                                                                      |  
|                                                                                             |  | (in thousands)                 |       
|Balance -
  beginning of period                                                              |  | $                              |       |                                                                      | $ |       |  
|                                                                                             |  |                                |        |                                                                      |   |        |  
|Additions to capitalized exploratory well costs
pending the determination of proved reserves |  |                                | 8,960  |                                                                      |   | 7,749  |  
|Capitalized exploratory well costs charged to
dry-hole costs                                 |  |                                | (1,418 | )                                                                    |   | (7,749 | )
|                                                                                             |  |                                |        |                                                                      |   |        |  
|Balance - end of period                                                                      |  | $                              | 7,542  |                                                                      | $ |       |  
|                                                                                             |  |                                |        |                                                                      |   |        |  

F-10

---



Dry-hole costs
are detailed in the table below.

|                        |  |                                |       |                                                                            |   |                                                                            |  |   |        | 
|----------------------- |  | ------------------------------ | ----- | -------------------------------------------------------------------------- | - | -------------------------------------------------------------------------- |  | - | ------ | 
|                        |  | Year ended
  December 31, 2007 |       | For the period
  August 28, 2006
  (Inception) through
  December 31, 2006 |   | For the period
  August 28, 2006
  (Inception) through
  December 31, 2007 | 
|                        |  |                                |       |                                                                            |   |                                                                            |  |   |        | 
|                        |  | (in thousands)                
|Lease
  Block           |  |                                |       |                                                                            |   |                                                                            |  |   |        | 
|                       
|South Timbalier 135/136 |  | $                              | 2,546 |                                                                            | $ | 7,749                                                                      |  | $ | 10,295 | 
|Eugene Island 255/256   |  |                                | 1,418 |                                                                            |   |                                                                           |  |   | 1,418  | 
|                        |  |                                |       |                                                                            |   |                                                                            |  |   |        | 
|                        |  | $                              | 3,964 |                                                                            | $ | 7,749                                                                      |  | $ | 11,713 | 
|                        |  |                                |       |                                                                            |   |                                                                            |  |   |        | 

5. Distributions

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

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

Available cash
from dispositions, as defined in the Funds LLC Agreement, is 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.

6. Related Parties

In 2007 and
2006, Ridgewood Energy Corporation, the Manager, was paid a one-time investment
fee of 4.5% of capital contributions. These fees were payable for services
provided by the Manager of locating, investigating and evaluating investment
opportunities and expensed as incurred. For the year ended December 31, 2007,
for the period August 28, 2006 (Inception) through December 31, 2006, and for the
period August 28, 2006 (Inception) through December 31, 2007, investment fees were
approximately $20 thousand, $3.3 million and $3.3 million, respectively. Of
this amount, approximately $0.4 million were included in due to affiliates at
December 31, 2006. There were no investment fees payable at December 31, 2007.

The Funds LLC
Agreement provides that the Manager render management, administrative and
advisory services. For such services, the Manager receives an annual management
fee, payable monthly, of 2.5% of total capital contributions net of cumulative
dry-hole costs. In 2007, the Manager changed its policy regarding the
management fee calculation, and netted cumulative dry-hole costs against the
total capital contributions, thus reducing its annual fee on a go-forward
basis. Management fees of approximately $1.5 million, $0.3 million and $1.8
million were incurred and paid for the year ended December 31, 2007, for the period
August 28, 2006 (Inception) through December 31, 2006 and for the period August
28, 2006 (Inception) through December 31, 2007, respectively. Of this amount
approximately $1 thousand and $52 thousand were included in due to affiliates
at December 31, 2007 and 2006, respectively.

The Manager
was paid an offering fee approximating 3.5% of capital contributions to cover
expenses incurred in the offer and sale of shares of the Fund. Such offering
fee was included in syndication costs (Note 2). For the period August 28, 2006
(Inception) through December 31, 2006, offering fees were approximately $2.5
million. Of this amount approximately $1 thousand and $0.3 million were
included in due to affiliates at December 31, 2007 and 2006, respectively.

From time to
time, short-term payables and receivables, which do not bear interest, arise
from transactions with affiliates in the ordinary course of business. As of
December 31, 2007 and 2006, there was no outstanding payables or receivables
related to these transactions.

F-11

---



Ridgewood
Securities Corporation, a registered broker-dealer affiliated with the Manager,
earned selling commissions and placement fees of approximately $5 thousand,
$0.8 million, and $0.8 million for the year ended December 31, 2007, the period
August 28, 2006 (Inception) through December 31, 2006 and the period August 28,
2006 (Inception) through December 31, 2007, respectively, for shares of the
Fund sold, which are reflected in syndication costs (Note 2) of approximately
$8.5 million. At December 31, 2007 and 2006, nil and $87 thousand,
respectively, were included in due to affiliates.

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

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

7. Fair Value of Financial Instruments

At December
31, 2007 and 2006, the carrying values of cash and cash equivalents, short-term
and long-term investments in marketable securities, and salvage fund,
approximate fair value.

8. Commitments and Contingencies

Capital Commitments

The Fund has entered into
multiple offshore operating agreements for the drilling and development of its
investment properties. The estimated capital expenditures associated with these
agreements vary depending on the stage of development on a property-by-property
basis. As of December 31, 2007, the Fund had committed to spend an additional $0.4 million
relating to the Walker Ridge 155 property. No other firm commitments have been
entered, however it is expected that the Fund will invest all of its unspent
capital on either Walker Ridge 155, or future projects.

Environmental
Considerations

The exploration for and
development of oil and natural gas involves the extraction, production and
transportation of materials which, under certain conditions, can be hazardous
or cause environmental pollution problems. The Manager and the Operators are
continually taking action they believe appropriate to satisfy applicable
federal, state and local environmental regulations and do not currently
anticipate that compliance with federal, state and local environmental
regulations will have a material adverse effect upon capital expenditures,
results of operations or the competitive position of the Fund in the oil and
natural gas industry. However, due to the significant public and governmental interest
in environmental matters related to those activities, the Manager cannot
predict the effects of possible future legislation, rule changes, or
governmental or private claims. At December 31, 2007 and 2006, there were no
known environmental issues that required the Fund to record a liability.

Insurance Coverage

The Fund is subject to all
risks inherent in the exploration for and development of oil and natural gas.
Insurance coverage as is customary for entities engaged in similar operations
is maintained, but losses may occur from uninsurable risks or amounts in excess
of existing insurance coverage. The occurrence of an event which is not insured
or not fully insured could have an adverse impact upon earnings and financial
position. Moreover, insurance is obtained as a package covering all of the
Managers investment programs and is allocated to the Fund. Claims made by
other such programs can reduce or eliminate insurance for the Fund.

F-12

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RIDGEWOOD ENERGY U FUND, LLC
SUPPLEMENTARY FINANCIAL INFORMATION
INFORMATION ABOUT OIL AND NATURAL 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 natural gas exploration and producing activities of the Fund. Tables
I and II provide historical cost information pertaining to capitalized costs,
costs incurred in exploration, property acquisitions and development, and
results of operations. As of December 31, 2007 and 2006, the Fund did not have
any proved reserves to warrant additional disclosures.

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

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

|                                |  |                    |       |                    |   |   | 
|------------------------------- |  | ------------------ | ----- | ------------------ | - | - | 
|                                |  | December 31,
 2007 |       | December 31,
 2006 |  
|                                |  |                    |       |                    |  
|                                |  | (in thousands)     |      
|Proved oil and gas
 properties  |  | $                  |      |                    | $ |  | 
|Unproved oil and gas properties |  |                    | 7,542 |                    |   |  | 
|                                |  |                    |       |                    |   |   | 
|Total oil and gas properties    |  | $                  | 7,542 |                    | $ |  | 
|                                |  |                    |       |                    |   |   | 

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

|                                          |  |                                |        |                                                                          |   |       | 
|----------------------------------------- |  | ------------------------------ | ------ | ------------------------------------------------------------------------ | - | ----- | 
|                                          |  | Year ended
 December 31,
 2007 |        | For the periodAugust 28,
 2006
 (Inception)
 through
 December 31,
 2006 |  
|                                          |  |                                |        |                                                                          |  
|                                          |  | (in thousands)                 |       
|Exploratory drilling costs
 - capitalized |  | $                              | 7,542  |                                                                          | $ |      | 
|Exploratory drilling costs
 - expensed    |  |                                | 3,964  |                                                                          |   | 7,749 | 
|                                          |  |                                |        |                                                                          |   |       | 
|                                          |  | $                              | 11,506 |                                                                          | $ | 7,749 | 
|                                          |  |                                |        |                                                                          |   |       | 

F-13

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SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

|                        |                             
|----------------------- | ----------------------------
|                        | RIDGEWOOD ENERGY U FUND, LLC
|                        |                             
|Date: February 20, 2008 | By:                         
|                        |                             
|                        |                             
|                        |                             
|                        |                             

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

|                          |  |                                                        |  |                   
|------------------------- |  | ------------------------------------------------------ |  | ------------------
|Signature                 |  | Capacity                                               |  | Date              
|                          |  |                                                        |  |                   
|/s/ ROBERT
 E. SWANSON    |  | Chief
 Executive Officer (Principal Executive Officer) |  | February 20, 2008 
|                          |  |                                                        |  |                   
|Robert E.
 Swanson        |  |                                                        |  |                   
|                          |  |                                                        |  |                   
|                          |  |                                                        |  |                   
|/s/ KATHLEEN
 P. MCSHERRY |  | Executive
 Vice President and Chief Financial          |  | February 20,
 2008
|                          |  | Officer
 (Principal Accounting Officer)                |  |                   
|Kathleen P.
 McSherry     |  |                                                        |  |                   
|                          |  |                                                        |  |                   
|                          |  |                                                        |  |                   
|/s/ ROBERT
 E. SWANSON    |  | Chief
 Executive Officer of Manager                    |  | February 20,
 2008
|                          |  |                                                        |  |                   
|Robert E.
 Swanson        |  |                                                        |  |                   

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