UNITED STATES


SECURITIES AND EXCHANGE COMMISSION





Washington, D.C. 20549





FORM 10-Q








x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2009


or





o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period fromto





Commission File No. 000-51268





RIDGEWOOD ENERGY M FUND, LLC


(Exact name of registrant as specified in its charter)





Delaware
(State or other jurisdiction of
incorporation or organization)

13-4285167
(I.R.S. Employer
Identification No.)





947 Linwood Avenue, Ridgewood, NJ 07450


(Address of principal executive offices) (Zip code)





(800) 942-5550


(Registrant’s telephone number, including area code)








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


Yes  xNo  o





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required
to submit and post such files).  Yes  oNo  o





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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





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





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


Yes o  No x

















PART I - FINANCIAL INFORMATION

PageItem 1.
Financial Statements

2Unaudited Condensed Balance Sheets as of June 30, 2009 and December 31, 2008

2Unaudited Condensed Statements of Operations for the three and six months endedJune 30, 2009 and 2008

3Unaudited Condensed Statements of Cash Flows for the six months endedJune 30, 2009 and 2008

4Notes to Unaudited Condensed Financial Statements

5Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations

11Item 3.
Quantitative and Qualitative Disclosures about Market Risk

16Item 4.
Controls and Procedures

16PART II - OTHER INFORMATIONItem 1.
Legal Proceedings

17Item 1A.
Risk Factors

17Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds

17Item 3.
Defaults Upon Senior Securities

17Item 4.
Submission of Matters to a Vote of Security Holders

17Item 5.
Other Information

17Item 6.
Exhibits

17SIGNATURES

18






1
 Table of Contents





PART I - FINANCIAL INFORMATIONITEM 1.  FINANCIAL STATEMENTSRIDGEWOOD ENERGY M FUND, LLCUNAUDITED CONDENSED BALANCE SHEETS(in thousands, except share data)June 30, 2009


December 31, 2008ASSETSCurrent assets:Cash and cash equivalents

$
1,204


$
3,687Production receivable


231



110Other current assets


9



87Total current assets


1,444



3,884Salvage fund


1,562



1,139Oil and gas properties:Advances to operators for working interests and expenditures


259



-Unproved properties


-



1,882Proved properties


23,497



20,346Less: accumulated depletion and amortization


(9,891
)


(7,537
)Total oil and gas properties, net


13,865



14,691Total assets

$
16,871


$
19,714LIABILITIES AND MEMBERS' CAPITALCurrent liabilities:Due to operators

$
356


$
1,337Accrued expenses


76



50Total current liabilities


432



1,387Asset retirement obligations


2,008



1,651Total liabilities


2,440



3,038Commitments and contingencies (Note 8)Members' capital:Manager:Distributions


(1,551
)


(1,439
)Retained earnings (accumulated deficit)


89



(28
)Manager's total


(1,462
)


(1,467
)Shareholders:Capital contributions (834 shares authorized;
535.6818 issued and outstanding)


78,887



78,887Syndication costs


(8,597
)


(8,597
)Distributions


(8,789
)


(8,152
)Accumulated deficit


(45,608
)


(43,995
)Shareholders' total


15,893



18,143Total members' capital


14,431



16,676Total liabilities and members' capital

$
16,871


$
19,714


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


2
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RIDGEWOOD ENERGY M FUND, LLCUNAUDITED CONDENSED STATEMENTS OF OPERATIONS(in thousands, except per share data)Three months ended June 30,


Six months ended June 30,2009


2008


2009


2008RevenueOil and gas revenue

$
567


$
182


$
1,331


$
628ExpensesDepletion and amortization


798



82



1,829



318Dry-hole costs


-



1,256



-



1,703Impairment of proved properties


64



-



611



(471
)Workover expenses


19



29



19



872Operating expenses


124



9



218



85General and administrative expenses


86



123



165



274Total expenses


1,091



1,499



2,842



2,781Loss from operations


(524
)


(1,317
)


(1,511
)


(2,153
)Other incomeInterest income


7



48



15



136Net loss

$
(517
)

$
(1,269
)

$
(1,496
)

$
(2,017
)Manager InterestNet income (loss)

$
43


$
(9
)

$
117


$
(102
)Shareholder InterestNet loss

$
(560
)

$
(1,260
)

$
(1,613
)

$
(1,915
)Net loss per share

$
(1,045
)

$
(2,352
)

$
(3,011
)

$
(3,575
)








3
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RIDGEWOOD ENERGY M FUND, LLCUNAUDITED CONDENSED STATEMENTS OF CASH FLOWS(in thousands)Six months ended June 30,2009


2008Cash flows from operating activitiesNet loss

$
(1,496
)

$
(2,017
)Adjustments to reconcile net loss to net cash provided by operating
activities:Depletion and amortization


1,829



318Dry-hole costs


-



1,703Impairment of proved property


611



-Settlement of asset retirement obligation


(24
)


(28
)Accretion expense


10



6Interest earned on marketable securities


-



(36
)Changes in assets and liabilities:(Increase) decrease in production receivable


(121
)


3Decrease in other current assets


78



77Increase in due to operators


21



193Increase (decrease) in accrued expenses


26



(67
)Net cash provided by operating activities


934



152Cash flows from investing activitiesPayments to operators for working interests and expenditures


(259
)


-Capital expenditures for oil and gas properties


(1,986
)


(5,578
)Investments in salvage fund


(423
)


(15
)Proceeds from the maturity of marketable securities


-



5,111Net cash used in investing activities


(2,668
)


(482
)Cash flows from financing activitiesDistributions paid


(749
)


-Net cash used in financing activities


(749
)


-Net decrease in cash and cash equivalents


(2,483
)


(330
)Cash and cash equivalents, beginning of period


3,687



8,163Cash and cash equivalents, end of period

$
1,204


$
7,833Supplemental schedule of non-cash investing activitiesAdvances used for capital expenditures in oil and gas
properties reclassified to unproved properties

$
-


$
66







4
 Table of Contents




RIDGEWOOD ENERGY M FUND, LLC


NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS




1.
Organization and Purpose





The Ridgewood Energy M Fund, LLC (the “Fund”), a Delaware limited liability company, was formed on August 2, 2004 and operates pursuant to a limited liability company agreement (the “LLC Agreement”) dated as of September 7, 2004 by and among Ridgewood Energy Corporation (the “Manager”) and the shareholders
of the Fund. The Fund was organized to acquire interests in oil and natural gas properties located in the United States offshore waters of Texas, Louisiana, and Alabama in the Gulf of Mexico.





The Manager has direct and exclusive control over the management of the Fund’s operations.  With respect to project investments, the Manager locates potential projects, conducts appropriate due diligence and negotiates and completes the transactions in which the investments are made.  The Manager performs, or arranges
for the performance of, the management, advisory and administrative services required for Fund operations. Such services include, without limitation, the administration of shareholder accounts, shareholder relations and the preparation, review and dissemination of tax and other financial information.  In addition, the Manager provides office space, equipment and facilities and other services necessary for Fund operations.  The Manager also engages and manages the contractual relations with
unaffiliated 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





Basis of Presentation


These unaudited interim condensed financial statements have been prepared by the Fund’s management in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in the opinion of management, contain all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the Fund’s financial position, results of operations and cash flows for the periods presented.  Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in these unaudited interim condensed financial statements.  The results of operations, financial position, and cash flows for the periods presented herein are not necessarily indicative of future financial results.  These unaudited
interim condensed financial statements should be read in conjunction with the Fund’s December 31, 2008 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”).  The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.  The Fund has assessed the impact of subsequent events through August 5, 2009,
the date of the issuance of its financial statements, and has concluded that there were no such events that require adjustment to, or disclosure in, the notes to the financial statements.





Use of Estimates


The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expense during the reporting
period. On an ongoing basis, the Manager reviews its estimates, including those related to property balances, 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 cash and cash equivalents. At times, bank deposits may be in excess of federally insured limits.  At June 30, 2009, bank balances exceeded federally insured limits by approximately $0.1 million, all of which was invested in money
market accounts that invest solely in U.S. Treasury bills and notes.  Effective October 2008 through December 31, 2013, federally insured limits have been increased from $0.1 million to $0.25 million for interest bearing deposits.  Additionally, non-interest bearing deposits are fully insured through December 31, 2009, after which they will be included in the $0.25 million limits.




5
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Salvage Fund


The Fund deposits in a separate interest-bearing account, or a salvage fund, money to provide for the dismantling and removal of production platforms and facilities and plugging and abandoning its wells at the end of their useful lives, in accordance with applicable federal and state laws and regulations.  At June 30, 2009, the
Fund had investments in U.S. Treasury securities within its salvage fund that are classified as held-to-maturity, totaling $1.5 million, which mature in October 2009 and February 2012.  Held-to-maturity investments are those securities that the Fund has the ability and intent to hold until maturity, and are recorded at cost plus accrued income, adjusted for the amortization of premiums and discounts, which approximates fair value.





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





Oil and Gas Properties


The Fund invests in oil and gas properties, which are operated by unaffiliated entities that are responsible for drilling, administering and producing activities pursuant to the terms of the applicable operating agreements with working interest owners.  The Fund's portion of exploration, drilling, operating and capital equipment
expenditures is billed by operators.





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





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





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





As of June 30, 2009 and December 31, 2008, amounts recorded in due to operators totaling $0.3 million and $1.3 million, respectively, related to capital expenditures for oil and gas properties.





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 may be required to advance its share of estimated cash expenditures for the succeeding month’s operation. The Fund accounts for such payments as
advances to operators for working interests and expenditures.  As drilling costs are incurred, the advances are reclassified to unproved properties.




Asset Retirement Obligations


For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired.  When a project reaches drilling depth and is determined to be either proved or dry, an asset retirement obligation is incurred.  Plug and abandonment costs associated with unsuccessful projects
are expensed as dry-hole costs.  The following table presents changes in asset retirement obligations for the six months ended June 30, 2009 and the year ended December 31, 2008.




6
 Table of Contents





June 30, 2009


December 31, 2008(in thousands)Balance, beginning of period

$
1,651


$
476Liabilities incurred


285



770Liabilities settled


(24
)


(35
)Accretion expense


10



16Revision to prior estimate


86



424Balance, end of period

$
2,008


$
1,651


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





Syndication Costs


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





Revenue Recognition and Imbalances


Oil and gas revenues are recognized when oil and gas is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectibility of the revenue is probable.





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





Impairment of Long-Lived Assets


The Fund reviews the value of its oil and gas properties whenever management determines that events and circumstances indicate that the recorded carrying value of properties may not be recoverable.  Impairments of producing properties are determined by comparing future net undiscounted cash flows to the net book value at the end
of each period.  If the net book value exceeds the future net undiscounted cash flows, the carrying value of the property is written down to fair value, which is determined using net discounted future cash flows from the producing property. The Fund provides for impairments on unproved properties when it determines that the property will not be developed or a permanent impairment in value has occurred.  The fair value determinations require considerable judgment and are sensitive to change.  Different
pricing assumptions, reserve estimates or discount rates could result in a different calculated impairment.  Given the volatility of oil and gas prices, it is reasonably possible that the Fund’s estimate of discounted future net cash flows from proved oil and gas reserves could change in the near term.  If oil and gas prices decline significantly, even if only for a short period of time, it is possible that write-downs of oil and gas properties could occur.  During the three
months ended June 30, 2009, the Fund recorded an impairment of $64 thousand related to Eugene Island 337.  During the six months ended June 30, 2009, the Fund recorded impairments totaling $0.6 million related to Eugene Island 337, Vermilion 344 and West Cameron 77.  The impairments to Eugene Island 337 and Vermilion 344 were a result of lower oil and gas commodity prices.  The carrying values for Eugene Island 337 and Vermilion 344 of $0.3 million and $1.9 million, respectively,
were written down to their fair values of $0.2 million and $1.4 million, respectively. The fair value of the impaired wells was determined based on level 3 inputs under Statement of Financial Accounting Standard No. 157, “Fair Value Measurements”, (“SFAS No. 157”), which include projected income from proved and probable reserves utilizing forward price curves, net of anticipated costs, discounted. The changes related to West Cameron 77 were the result of additional retirement obligations.  West
Cameron 77 was fully depleted as of December 31, 2008.





Depletion and Amortization


Depletion and amortization of the cost of proved oil and gas properties are calculated using the units-of-production method.  Proved developed reserves are used as the base for depleting capitalized costs associated with successful exploratory well 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.




7
 Table of Contents





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 interest income and certain expenses such as dry-hole costs, trust fees, depletion and amortization which are allocated 99% to shareholders and 1% to the Manager.





Recent Accounting Standards





In June 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards CodificationTMand
the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”), which establishes the FASB Accounting Standards CodificationTM as the source of GAAP to be applied to nongovernmental agencies.  SFAS 168 explicitly recognizes rules and interpretive releases of the SEC under authority of federal securities laws as authoritative GAAP for SEC registrants.
SFAS 168 will become effective for interim or annual periods ending after September 15, 2009.  SFAS 168 will not have a material impact on the Fund’s financial statements.





In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 was adopted effective for
the second quarter of 2009 and did not have a material impact on the Fund’s financial statements.





In April 2009, the FASB issued FASB Staff Position No. SFAS 107-1 and APB No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), which requires quarterly disclosure of information about the fair value of financial instruments within the scope of SFAS
No. 107, “Disclosures about Fair Value of Financial Instruments.” FSP FAS 107-1 and APB 28-1 was adopted effective for the second quarter of 2009 and did not have a material impact on the Fund’s financial statements.





In April 2009, the FASB issued FASB Staff Position No. FAS 115-2 and 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”(“FSP FAS 115-2 and 124-2”). FSP FAS 115-2 and 124-2 amends the other-than-temporary impairment
guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FSP FAS 115-2 and 124-2 does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FSP FAS 115-2 and 124-2 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after
initial adoption, FSP FAS 115-2 and 124-2 requires comparative disclosures only for periods ending after initial adoption. FSP FAS 115-2 and 124-2 was adopted effective for the second quarter of 2009 and did not have a material impact on the Fund’s financial statements.





In December 2008, the SEC issued Release No. 33-8995, “Modernization of Oil and Gas Reporting,” amending oil and gas reporting requirements under Rule 4-10 of Regulation S-X and Industry Guide 2 in Regulation S-K.  The new requirements provide for consideration of new technologies in evaluating reserves,
allow companies to disclose their probable and possible reserves to investors, report oil and gas reserves using an average price based on the prior 12-month period rather than year-end prices, and revise the disclosure requirements for oil and gas operations.  The final rules are effective for fiscal years ending on or after December 31, 2009.





In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” (“SFAS 157”), which applies under most other accounting pronouncements that require or permit fair value measurements. SFAS 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. SFAS 157 also provides guidance on the methods used to measure fair value and requires expanded disclosures related to fair value measurements.  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“SFAS 157-2”).  SFAS 157-2 delayed the effective date of SFAS 157 for all non-financial assets and non-financial liabilities, except those that are recognized
or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Fund adopted SFAS 157 for financial assets and financial liabilities effective January 1, 2008 and for non-financial assets and non-financial liabilities effective January 1, 2009, which includes applying the provisions of SFAS 157 to (i) other non-financial assets measured at fair value in conjunction with impairment assessments; and (ii) asset retirement obligations initially measured at fair value. The adoption
did not have a material impact on the Fund’s balance sheet, statement of operations, or statement of cash flows.




8
 Table of Contents





3.
Unproved Properties - Capitalized Exploratory Well Costs





Leasehold acquisition and exploratory drilling costs are capitalized pending determination of whether the well has found proved reserves.  Unproved properties are assessed on a quarterly basis by evaluating and monitoring if sufficient progress is made on assessing the reserves.  At June 30, 2009, the Fund had no capitalized
exploratory well costs in excess of one year.  The following table reflects the net changes in unproved properties for the six months ended June 30, 2009 and the year ended December 31, 2008.





June 30, 2009


December 31, 2008(in thousands)Balance, beginning of period

$
1,882


$
7,357Additions to capitalized exploratory well costs pending the
determination of proved reserves


546



6,940Reclassification to proved properties based on the
determination of proved reserves


(2,428
)


(12,415
)Capitalized exploratory well costs charged to dry-hole costs


-



-Balance, end of period

$
-


$
1,882


Capitalized exploratory well costs are expensed as dry-hole costs in the event that reserves are not found or are not in sufficient quantities to complete the well and develop the field.  There were no dry-hole costs during the three and six months ended June 30, 2009.  Dry-hole costs of $1.3 million and $1.7 million,
respectively, for the three and six months ended June 30, 2008, related primarily to South Marsh Island 213.





4.
Distributions





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





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





Available cash from dispositions, as defined in the LLC Agreement, will be paid 99% to shareholders and 1% to the Manager until the shareholders have received total distributions equal to their capital contributions. After shareholders have received distributions equal to their capital contributions, 85% of available cash from dispositions
will be distributed to shareholders and 15% to the Manager.





5.
Related Parties





Effective October 1, 2007 and continuing for the remaining life of the Fund, the Manager elected to waive its management fee.  Upon the waiver of the management fee, the Fund began recording costs relating to services provided by the Manager for accounting and investor relations.  Such costs, totaling $20 thousand and
$40 thousand for each of the three and six months ended June 30, 2009 and 2008, respectively, were included in general and administrative expenses.  At times, short-term payables and receivables, which do not bear interest, arise from transactions with affiliates in the ordinary course of business.  At June 30, 2009 and December 31, 2008, there were no such amounts outstanding.





None of the compensation paid to 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.





6.
Fair Value of Financial Instruments





At June 30, 2009 and December 31, 2008, the carrying value of cash and cash equivalents, production receivable, salvage fund and accrued expenses approximate fair value.




9
 Table of Contents





7.
Commitments and Contingencies





Capital Commitments


The Fund has entered into multiple agreements for the drilling and development of its investment properties. The estimated capital expenditures associated with these agreements vary depending on the stage of development on a property-by-property basis. The Fund has nearly completed its capital investment program.  At June 30,
2009, the Fund has capital commitments of $1.7 million that exceed, by $0.7 million, its current available working capital of $1.0 million, and an unfunded asset retirement obligation of $0.4 million.  The Fund expects cash flow from operations to be sufficient to cover these deficiencies.  If required, the Fund will reduce or suspend distributions until such deficiency is funded.





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 operators of the Fund’s properties are continually taking action they believe appropriate
to satisfy applicable federal, state and local environmental regulations and do not currently anticipate that compliance with federal, state and local environmental regulations will have a material adverse effect upon capital expenditures, results of operations or the competitive position of the Fund in the oil and 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 June 30, 2009 and December 31, 2008, there were no known environmental contingencies 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 gas. Insurance coverage as is customary for entities engaged in similar operations is maintained, but losses may occur from uninsurable risks or amounts in excess of existing insurance coverage. The occurrence of an event that is not insured or not
fully insured could have an adverse impact upon earnings and financial position.  Moreover, insurance is obtained as a package covering all of the funds managed by the Manager.  Claims made by other funds can reduce or eliminate insurance for the Fund.





10
 Table of Contents





ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Cautionary Statement Regarding Forward-Looking Statements





Certain statements in this Quarterly Report on Form 10-Q (“Quarterly Report”) and the documents Ridgewood Energy M Fund, LLC (the “Fund”) has incorporated by reference into this Quarterly Report, other than purely historical information, including estimates, projections, statements relating to the Fund’s
business plans, strategies, objectives and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements.  These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “target,” “pursue,” “may,” “will likely result,” and similar expressions. Examples of such events that could cause actual results to differ materially from historical results or those anticipated include weather conditions, such as hurricanes, changes in market conditions affecting the pricing of oil and natural gas, the cost and availability of equipment, and changes in governmental
regulations.  The Fund undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.





Critical Accounting Policies and Estimates





The following discussion and analysis of the Fund’s financial condition and operating results is based on its financial statements.  The preparation of this Quarterly Report requires the Fund to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the Fund’s financial statements, and the reported amount of revenue and expense during the reporting period.  Actual results may differ from those estimates and assumptions.  See “Notes to Unaudited Condensed Financial Statements” in Part I of this Quarterly Report for a presentation of the Fund’s significant accounting policies.  No changes have been made to the Fund’s critical accounting policies and estimates disclosed in its 2008 Annual
Report on Form 10-K.





Overview of the Fund’s Business





The Fund is a Delaware limited liability company formed on August 2, 2004 to acquire interests in oil and natural gas properties located in the United States offshore waters of Texas, Louisiana and Alabama in the Gulf of Mexico.  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 of the Fund’s operations.  The Fund’s primary investment objective is to generate cash for distribution to its shareholders through the acquisition of “working interests” in the exploration production and sale of oil and natural gas.





The Manager performs certain duties on the Fund’s behalf including the evaluation of potential projects for investment and ongoing management, administrative and advisory services associated with these projects.  The Fund does not currently, nor is there any plan to operate any project in which the Fund participates.  The
Manager enters into operating agreements with third-party operators for the management of all exploration, development and producing operations, as appropriate.  The Manager also participates in distributions.





Business Update





The Fund owns working interests and has participated in the drilling of fifteen wells; six are currently producing, completion efforts are ongoing for one and eight have been determined to be dry-holes or have been fully depleted.  The Fund does not expect to participate in any additional wells.





Discoveries


Whistler Project


In July 2008, the Fund acquired a 20.0% working interest in the Whistler Project, an exploratory well.  The Whistler project was determined to be a discovery in November 2008 and completion efforts are ongoing.  The well is expected to commence production during the first quarter of 2010.  Through June 30,
2009, the Fund has spent $3.5 million on this well, for which the total estimated budget is $5.2 million.




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West Cameron 57


In 2007, the Fund acquired a 12.5% working interest in West Cameron 57, an exploratory well.  The well was determined to be a discovery in February 2008 and production commenced in December 2008.  The total cost of this well was $4.8 million.





LLOG Projects


In October 2006, the Fund acquired an 8.75% working interest in six exploratory wells which are operated by LLOG Offshore Exploration Inc. (“LLOG”) off the coast of Louisiana.  Of the six wells, the Fund elected not to proceed with one well and one well was determined to be a dry hole.





The remaining four LLOG wells, as detailed below, have been determined to be discoveries.  Through June 30, 2009, the Fund spent $8.2 million related to these wells.  The Fund has recorded impairments related to Vermilion 344 totaling $1.8 million, of which $0.5 million of impairment expense was incurred during the six
months ended June 30, 2009.








South Marsh Island 111
Discovery July 2007; Production
commenced February 2009Vermilion 344
Discovery January 2007; Production
commenced December 2008West Delta 68
Discovery March 2007; Production
commenced July 2008West Delta 67
Discovery November 2007; Production
commenced July 2008





Eugene Island 337


In 2006, the Fund acquired a 20.0% ownership in Eugene Island 337, an exploratory well.  The well was determined to be a discovery in July 2006 and production commenced in November 2007.  The total cost of this well was $6.1 million, of which the Fund has recorded impairment costs totaling $5.6 million of which $64 thousand
of impairment expense was incurred during the six months ended June 30, 2009.





The pipeline utilized to transport Eugene Island 337 oil and natural gas production suffered damage as a result of hurricane activity in the third quarter 2008, thereby shutting down production for this well, which resumed in June 2009.  There was no cost to the Fund related to these repair activities.





Results of Operations





The following table summarizes the Fund’s results of operations for the three and six months ended June 30, 2009 and 2008 and should be read in conjunction with the Fund’s financial statements and notes thereto included within Item 1. “Financial Statements” in Part I of this Quarterly Report.




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Three months ended June 30,


Six months ended June 30,2009


2008


2009


2008(in thousands)RevenueOil and gas revenue

$
567


$
182


$
1,331


$
628ExpensesDepletion and amortization


798



82



1,829



318Dry-hole costs


-



1,256



-



1,703Impairment of proved properties


64



-



611



(471
)Workover expenses


19



29



19



872Operating expenses


124



9



218



85General and administrative expenses


86



123



165



274Total expenses


1,091



1,499



2,842



2,781Loss from operations


(524
)


(1,317
)


(1,511
)


(2,153
)Other incomeInterest income


7



48



15



136Net loss

$
(517
)

$
(1,269
)

$
(1,496
)

$
(2,017
)


Overview.During the three and six months ended June 30, 2009, the Fund had six producing wells;  Eugene Island 337 commenced production in 2007, West Delta 67 and West Delta 68 commenced production
in July 2008, West Cameron 57 and Vermilion 344 commenced production in December 2008 and South Marsh Island 111 commenced production in February 2009.  During the three and six months ended June 30, 2008, the Fund had two producing wells, West Cameron 77, which was fully depleted as of December 31, 2008, and Eugene Island 337.





As previously discussed in the “Business Update”, the pipeline utilized to transport Eugene Island 337’s oil and gas production suffered damage as a result of hurricane activity in the third quarter 2008, thereby shutting down production for Eugene Island 337, which resumed production in June 2009.





Oil and Gas Revenue.Oil and gas revenue for the three months ended June 30, 2009 was $0.6 million, a $0.4 million increase from the three months ended June 30, 2008.  The increase is attributable
to an increase in sales volumes of $1.6 million, partially offset by the impact of lower average prices of $1.2 million.  Oil and gas revenue for the six months ended June 30, 2009 was $1.3 million, a $0.7 million increase from the six months ended June 30, 2008.  The increase is attributable to an increase in sales volumes of $2.5 million, partially offset by the impact of lower average prices of $1.9 million.





Oil sales volumes were 2 thousand barrels during the three months ended June 30, 2009 compared to minimal amounts during the three months ended June 30, 2008.  The Fund’s oil prices averaged $59 per barrel and $114 per barrel during the three months ended June 30, 2009 and 2008, respectively.





Oil sales volumes were 4 thousand barrels during the six months ended June 30, 2009 compared to 300 barrels during the six months ended June 30, 2008.  The Fund’s oil prices averaged $51 per barrel and $99 per barrel during the six months ended June 30, 2009 and 2008, respectively.





Gas sales volumes were 122 thousand mcf during the three months ended June 30, 2009, compared to 14 thousand mcf  during the three months ended June 30, 2008.  The Fund’s gas prices averaged $3.58 per mcf and $12.95 per mcf during the three months ended June 30, 2009 and 2008, respectively.





Gas sales volumes were 269 thousand mcf during the six months ended June 30, 2009, compared to 58 thousand mcf  during the six months ended June 30, 2008.  The Fund’s gas prices averaged $4.04 per mcf and $10.22 per mcf during the six months ended June 30, 2009 and 2008, respectively.




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The increase in oil and gas volumes for the three and six months ended June 30, 2009 compared to the three and six months ended June 30, 2008, is primarily attributable to the timing of the onset of production of the Fund’s wells, as discussed above in “Overview”.  This increase was offset by lower oil and gas
sales volumes for West Cameron 77, which was fully depleted at December 31, 2008 and Eugene Island 337, which suffered damage as a result of hurricane activity in the third quarter of 2008, shutting down its production until June 2009.





Depletion and Amortization.  Depletion and amortization for the three months ended June 30, 2009 and 2008, was $0.8 million and $0.1 million, respectively.  Depletion and amortization for the six months ended June 30, 2009 and 2008, was $1.8
million and $0.3 million, respectively.  The increase is due to the onset of production of the Fund’s wells, partially offset by the abandonment of West Cameron 77 and the temporary shut-in of Eugene Island 337 as discussed above in “Overview”.





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 gas in sufficient quantities to justify completion
of the well. There were no dry-hole costs during the three and six months ended June 30, 2009.  Dry-hole costs of $1.3 million and $1.7 million for the three and six months ended June 30, 2008, respectively, were primarily attributable to South Marsh Island 213.





Impairment of Proved Properties, net.During the three months ended June 30, 2009, the Fund recorded an impairment to proved properties of $64 thousand, related to
Eugene Island 337, which was attributable to lower oil and gas commodity prices.  During the six months ended June 30, 2009, the Fund recorded impairments to proved properties of $0.6 million, of which $0.5 million and $64 thousand related to Vermilion 344 and Eugene Island 337, respectively.  Such impairments were principally attributable to lower oil and gas commodity prices.  Additionally, $86 thousand was recorded related to the West Cameron 77 asset retirement cost estimates,
which was fully depleted at December 31, 2008.  During the six months ended June 30, 2008, the Fund recorded a credit to impairment of proved properties of $0.5 million upon review of well costs related to Eugene Island 364, which had been fully impaired in 2007.





Workover Expenses.  Workover expenses represent costs to restore or stimulate production of existing reserves of a proved property.  Workover expenses of $19 thousand during the three and six months ended June 30, 2009 were attributable to West
Delta 67.  Workover expenses of $29 thousand and $0.9 million during the three and six months ended June 30, 2008, respectively, were attributable to recompletion efforts for the upper reservoir zone of West Cameron 77, which ultimately proved unsuccessful.





Operating Expenses.  Operating expenses include the costs of operating and maintaining wells and related facilities, geological costs and accretion expense, as detailed in the following table.





Three months ended June 30,


Six months ended June 30,2009


2008


2009


2008(in thousands)Lease operating expense

$
119


$
3


$
208


$
75Accretion expense and other


5



6



10



10$
124


$
9


$
218


$
85


Lease operating expense for the three and six months ended June 30, 2009 and 2008 related to the Fund’s producing properties during each period as outlined above in “Overview”.  Accretion expense related to the asset retirement obligations established for the Fund’s proved properties.





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




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Three months ended June 30,


Six months ended June 30,2009


2008


2009


2008(in thousands)Accounting fees

$
40


$
43


$
74


$
108Insurance expense


26



54



49



116Management reimbursement


20



20



40



40Trust fees and other


-



6



2



10$
86


$
123


$
165


$
274


Accounting fees represent audit and tax preparation fees, quarterly review and filing fees incurred by the Fund.  Insurance expense represents premiums related to producing well and control of well insurance, which varies dependent upon the number of wells producing or drilling, and director’s and officers’ liability
insurance.  Management reimbursement relates to reimbursements for various administrative costs incurred on the Fund’s behalf.  Trust fees represent bank fees associated with the management of the Fund’s cash accounts.





Interest Income.Interest income is comprised of interest earned on money market accounts and investments in U.S. Treasury securities within the Fund’s salvage fund.  Interest
income for the three months ended June 30, 2009 was $7 thousand, a $41 thousand decrease from the three months ended June 30, 2008.  Interest income for the six months ended June 30, 2009 was $15 thousand, a $121 thousand decrease from the six months ended June 30, 2008. The decreases were attributable to a reduction in the average outstanding balances earning interest due to ongoing capital expenditures for oil and gas properties, coupled with lower interest rates earned.





Capital Resources and Liquidity





Operating Cash Flows


Cash flows provided by operating activities for the six months ended June 30, 2009 were $0.9 million, primarily related to revenue receipts of $1.2 million and favorable working capital of $0.1 million, partially offset by operating expenses of $0.2 million and general and administrative expenses of $0.2 million.





Cash flows provided by operating activities for the six months ended June 30, 2008 were $0.2 million, primarily related to revenue received of $0.6 million and interest received of $0.1 million, partially offset by general and administrative expenses of $0.3 million and operating expenses of $0.2 million.





Investing Cash Flows


Cash flows used in investing activities for the six months ended June 30, 2009 were $2.7 million, related to capital expenditures for oil and gas properties of $2.2 million, inclusive of advances, and investments in the salvage fund of  $0.4 million, inclusive of interest earned on this account.





Cash flows used in investing activities for the six months ended June 30, 2008 were $0.5 million, related to capital expenditures for oil and gas properties of $5.6 million, partially offset by the proceeds from the maturity of marketable securities of $5.1 million.  Additionally, the Fund increased its salvage fund investments
by $15 thousand, which consisted of interest earned on this account.





Financing Cash Flows


Cash flows used in financing activities for the six months ended June 30, 2009 were $0.7 million, related to distributions paid.





There were no cash flows from financing activities for the six months ended June 30, 2008.





Estimated Capital Expenditures





The Fund has entered into multiple agreements for the drilling and development of its investment properties.  The estimated capital expenditures associated with these agreements can vary depending on the stage of development on a property-by-property basis.  As of June 30, 2009, the Fund had committed to spend an additional
$1.7 million related to its investment properties.   The Fund does not expect to participate in any additional investment properties.




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





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





Liquidity Needs





The Fund’s primary short-term liquidity needs are to fund its operations, including capital expenditures for its investment properties.  The Fund has nearly completed its capital investment program.  At June 30, 2009, the Fund has capital commitments of $1.7 million that exceed, by $0.7 million, its current available
working capital of $1.0 million, and an unfunded asset retirement obligation of $0.4 million.  The Fund expects cash flow from operations to be sufficient to cover these deficiencies, as well as ongoing operations.  If required, the Fund will reduce or suspend distributions until such deficiency is funded.





Distributions are funded from available cash from operations, as defined in the Fund’s limited liability company agreement, and the frequency and amount are within the Manager’s discretion subject to available cash from operations, reserve requirements and the Fund’s operations.





Operations are funded utilizing operating income, existing cash on-hand and income earned therefrom.





Off-Balance Sheet Arrangements





The Fund had no off-balance sheet arrangements as of June 30, 2009 and December 31, 2008 and does not anticipate the use of such arrangements in the future.





Contractual Obligations





The Fund enters into operating agreements with operators.  On behalf of the Fund, an operator enters into various contractual commitments pertaining to exploration, development and production activities.  The Fund does not negotiate any such contracts. No contractual obligations exist at June 30, 2009 and December 31, 2008 other
than those discussed in “Estimated Capital Expenditures” above.





Recent Accounting Pronouncement





See Note 3 of Notes to Unaudited Condensed Financial Statements – “Recent Accounting Standards” contained in this Quarterly Report for a discussion of recent accounting pronouncements.





ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not required.





ITEM 4.  CONTROLS AND PROCEDURES





In accordance with Exchange Act Rules 13a-15 and 15d-15, the Fund carried out an evaluation, under the supervision and with the participation of management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Fund’s disclosure controls and procedures as of the end of the period covered
by this report.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective as of June 30, 2009.




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There has been no change in the Fund’s internal control over financial reporting that occurred during the three months ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.





PART II -OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS





There have been no changes to the legal proceedings disclosed in the Fund’s most recent Annual Report on Form 10-K.





ITEM 1A. RISK FACTORS





Not required.





ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





None.





ITEM 3.  DEFAULTS UPON SENIOR SECURITIES





None.





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





None.





ITEM 5. OTHER INFORMATION





None.





ITEM 6. EXHIBITS






ExhibitNumber

Title of Exhibit

Method of Filing31.1

Certification of Robert E. Swanson, Chief Executive Officer of the Fund, pursuant to Securities Exchange Act Rule 13a-14(a)

Filed herewith31.2

Certification of Kathleen P. McSherry, Chief Financial Officer of the Fund, pursuant to Securities Exchange Act Rule 13a-14(a)

Filed herewith32

Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, signed by Robert E. Swanson, Chief Executive Officer of the Fund and Kathleen P. McSherry, Chief Financial Officer of the Fund

Filed herewith
 
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SIGNATURES





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





RIDGEWOOD ENERGY M FUND, LLCDated:
August 5, 2009
By:
/s/


ROBERT E. SWANSONName:


Robert E. SwansonTitle:


Chief Executive Officer(Principal Executive Officer)Dated:
August 5, 2009
By:
/s/


KATHLEEN P. MCSHERRYName:


Kathleen P. McSherryTitle:


Executive Vice President and Chief Financial Officer(Principal Financial Officer)
















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