Exhibit
10.7




PARTICIPATION
AGREEMENT


2008-2009
Drilling Package








This
Participation Agreement (“Agreement”) is made and
entered into effective as of the 1st day of August, 2008 (the "Effective Date"), by and
between Newfield Exploration Company, a Delaware corporation (“Newfield”), whose address is
363 N. Sam Houston Parkway East, Suite 2020, Houston, Texas 77060 and Ridgewood
Energy Corporation, a Delaware corporation (“Ridgewood”), whose address is
11700 Katy Freeway, Suite 280, Houston, Texas 77079.  Newfield and
Ridgewood are also sometimes hereinafter referred to collectively as the
“Parties” or individually as a “Party”.





WITNESSETH:





WHEREAS,Newfield owns a 100%
Record Title Interest (as such term is defined hereafter) in and to each of the
following oil and gas leases (hereinafter individually referred to as a “Prospect Area” and
collectively referred to as the “Contract Area”):





Oil and
Gas Lease bearing Serial No. [REDACTED], dated effective August 1, 2008, granted
by the United States of America, as Lessor, in favor of Newfield Exploration
Company, as Lessee, covering all of [REDACTED], containing approximately 5000
acres (“REDACTEDLease”);





Oil and
Gas Lease bearing Serial No. [REDACTED], dated effective August 1, 2008, granted
by the United States of America, as Lessor, in favor of Newfield Exploration
Company, as Lessee, covering all of [REDACTED, containing approximately 4999.17
acres (“REDACTEDLease”); and





Oil and
Gas Lease bearing Serial No. [REDACTED], dated effective August 1, 2008, granted
by the United States of America, as Lessor, in favor of Newfield Exploration
Company, as Lessee, covering all of [REDACTED], containing approximately 5000.00
acres (“REDACTEDLease”);





WHEREAS, Ridgewood would like
to participate in the drilling of a Test Well (as such term is defined
hereafter) on each Prospect Area;





WHEREAS, Ridgewood agrees to
pay a disproportionate share of the drilling costs and expenses associated with
each Test Well in order to earn a Record Title Interest in each Prospect Area,
pursuant to the terms and conditions of this Agreement; and





WHEREAS, the Parties desire to
enter into this Agreement to set forth the manner in which the costs and
expenses of drilling, producing and operating each Test Well and any subsequent
wells, as well as the ownership of the production from the Contract Area shall
be shared.





NOW, THEREFORE, in
consideration of the mutual benefits and advantages accruing hereunder, the
receipt and sufficiency of which are hereby acknowledged, the Parties hereby
agree as follows:







Article 1 – Interest of the
Parties





The costs
and expenses associated with the exploration and development of the Contract
Area (including all wells, platforms, pipelines, facilities and equipment
associated directly with the specified operations herein) and all oil and gas
produced from wells drilled pursuant to the terms hereof, shall be borne and
owned, subject to the terms and conditions set out in this Agreement, and unless
otherwise agreed, by the Parties in accordance with the following percentage
Record Title Interests:




Party
              Record
      Title InterestsNewfield
              66.66667%
      *Ridgewood
              33.33333%
      *





*Subject to an obligation by Ridgewood
to pay a disproportionate share of the costs and expenses of each Test Well, as
further described in Article 3 of this Agreement.





The term “Record Title Interests” as
used in this Agreement shall mean the right to drill for, produce, remove, own,
and dispose of oil, gas and/or condensate that may be found on and produced from
a Prospect Area.





Article 2 - Operating
Agreement





2.1           Newfield
shall be designated as the Operator of each Prospect Area, and all operations
conducted on a Prospect Area shall be performed in accordance with and shall be
subject to the terms and provisions of this Agreement and the Operating
Agreement attached hereto as Exhibit “A” (“Operating
Agreement”).  Upon Ridgewood earning an Assignment (as such
term is defined hereafter), the Parties shall execute an Operating Agreement,
using the form attached hereto as Exhibit “A”, to govern operations on such
Prospect Area.  It is the intent of the Parties that there shall be a
separate Operating Agreement for each Prospect Area.





2.2           Notwithstanding
anything herein to the contrary, the non-consent penalties set forth in the
Operating Agreement shall not be applicable to drilling operations on the Test
Well for a Prospect Area, or Substitute Well therefore, prior to the Parties
reaching Casing Point (as such term is defined hereafter) in such
well.








Article 3 - Test
Well





3.1           On
or before March 31, 2009 or a date mutually agreed to by the parties and subject
to Force Majeure (as such term is defined hereafter), Newfield will commence, or
cause to be commenced, drilling operations on (a) [REDACTED (“Redacted Test Well”), (b)
[REDACTED (“RedactedTest
Well”), and (c) [REDACTED] (“RedactedTest Well”) (the Redacted
Test Well, the Redacted Test Well, and the Redacted Test Well are sometimes
individually referred to as the “Test Well”) or collectively
referred to as the “Test
Wells”).  Each Test Well shall be drilled to the total depth
listed in the Authority for Expenditure (“AFE”) for such Test Well, or a
depth sufficient to test the stratigraphic equivalent of the formation listed in
AFE for such Test Well, whichever is lesser (“Objective
Depth”).





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3.2(a)      Newfield
shall furnish to Ridgewood an AFE for the drilling and evaluation costs (“Dry
Hole Cost”) of a Test Well at least 30 days prior to the commencement of actual
drilling operations for such Test Well.  The AFE for each Test Well is
estimated to be as follows:





$19,400,000.00 for the Redacted Test
Well; and,


$9,400,000.00 for the Redacted Test
Well; and,


$14,700,000.00 for the Redacted Test
Well.








(b)         As
additional consideration for the opportunity to earn a Record Title Interest in
a Prospect Area, Ridgewood will pay a disproportionate share of the AFE Dry Hole
Cost for each Test Well.  Ridgewood shall pay a 44.443% share of the
Dry Hole Cost and expenses shown on an AFE for a Test Well, or a Substitute Well
therefore, until (i) the cumulative costs and expenses for such Test Well, or a
Substitute Well therefore, exceeds 110% of the AFE Dry Hole Cost for such Test
Well, or (ii) upon such Test Well reaching Casing Point, whichever occurs
first.  Thereafter, Ridgewood will pay a 33.333% share of the
subsequent costs and expenses of such Test Well, and all subsequent operations
on the Prospect Area, subject to the non-consent rights set out in the Operating
Agreement.





(c)         If the AFE for a
Test Well is greater than the amount listed above in Section 3.2 (a) (“Revised AFE”), then Ridgewood
will have thirty (30) days after receipt of the Revised AFE to elect to
participate in the drilling of such Test Well under the Revised
AFE.  If Ridgewood fails to timely provide written notice to Newfield
of its election to participate, then Ridgewood shall be deemed to have elected
to participate in the Revised AFE.  If Ridgewood participates in the
drilling of a Test Well under the Revised AFE, then Ridgewood shall pay a
44.443% share of the costs and expenses of such Revised AFE until (i) the
cumulative costs and expenses for such Test Well, or a Substitute Well
therefore, exceeds 110% of the Revised AFE for such Test Well, or (ii) upon such
Test Well reaching Casing Point, whichever occurs first.  Thereafter,
Ridgewood will pay a 33.333% share of the costs and expenses for such Test Well,
and all subsequent operations on the Prospect Area, subject to the non-consent
rights set out in the Operating Agreement.  Should Ridgewood elect not
to participate in a Revised AFE, then Ridgewood shall be deemed to have
relinquished all of its Record Title Interest earning rights in the associated
Prospect Area.








3.3           In
the event Ridgewood participates in the drilling of a Test Well, Ridgewood shall
pay Newfield, within ten (10) business days prior to the commencement of actual
drilling operations on such Test Well, Ridgewood’s proportionate share of sunk
land and G&G costs for such Prospect Area, as set out below (“Sunk Costs”):





$783,992.00 for Redacted Lease;
and,


$1,214,988.00 for Redacted Lease;
and,


$1,780,982.00 for Redacted
Lease.





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3.4           For
the purposes of this Agreement, the term “Casing Point” is defined as
that point in time when a Test Well, or Substitute Well therefore, has been
drilled to its Objective Depth, and all open-hole logs and all appropriate tests
have been performed and delivered to the Parties, and a recommendation is made
to (i) set casing and complete the well, (ii) plug and abandon the well, or
(iii) conduct other operations as provided within the priority of operations
outlined within the Operating Agreement.





3.5           If
a Test Well is either, (i) unable to reach its Objective Depth due to
encountering domal material, heaving shale, saltwater, salt or other
impenetrable substance, or suffers any adverse condition (mechanical,
structural, stratigraphic or otherwise) in drilling said well, which substance
or condition cannot be overcome at a reasonable cost by means considered
customary or ordinary in the industry; or, (ii) plugged and abandoned as a dry
hole, then Newfield shall have the option, but not the obligation, to propose a
substitute well to be drilled to the Objective Depth of such Test Well (“Substitute
Well”).  Ridgewood shall have the option, but not the
obligation, to participate in such Substitute Well; however, if Ridgewood elects
not to participate in such Substitute Well, it shall relinquish all of its
right, title and interest in the associated Prospect Area and reassign to
Newfield all of its Record Title Interest in such Prospect Area under the terms
of this Agreement.  If actual drilling operations are commenced on the
Substitute Well within one hundred twenty (120) days from the date of rig
release from the Test Well, then such Substitute Well shall be considered the
Test Well for the Prospect Area for purposes of this Agreement.





3.6           Newfield
shall have the right to require Ridgewood to pay in advance its share of the
costs and expenses of an AFE, or Revised AFE, pursuant to the terms and
conditions of the Operating Agreement.





3.7           In
its sole discretion, Newfield shall elect whether to issue an AFE and/or propose
the drilling of a Test Well on a Prospect Area.   If Newfield
elects not to issue an AFE and/or drill a Test Well on a Prospect Area, then
Ridgewood’s only remedy shall be the return of any Sunk Costs paid by Ridgewood
to Newfield for such Prospect Area.








Article 4 -
Assignment





4.1           Within
ten (10) business days after Newfield’s receipt from Ridgewood of the Sunk Costs
for a Prospect Area, Newfield shall deliver to Ridgewood an assignment of an
undivided 33.33333% Record Title Interest in such Prospect Area, using the form
of assignment attached hereto as Exhibit “B” (“Assignment”).  The
Record Title Interest conveyed to Ridgewood will be subject to its proportionate
share of the lessor’s royalty and its proportionate share of an overriding
royalty interest equal to 2% of 6/6 to be reserved in favor of Newfield in the
Assignment.  The Record Title Interest conveyed to Ridgewood shall
otherwise be free and clear of any other overriding royalty interests,
production payments, or other burdens on production, subject to a special
limited warranty of title.





4.2           In
the event that Ridgewood does not participate in the drilling of a Test Well, or
Substitute Well therefore, Ridgewood shall immediately reassign to Newfield, on
a form of assignment acceptable to Newfield, all of its right, title and
interest, including all of its Record Title Interest, in the Prospect Area for
such Test Well.  Such reassignment shall be made free and clear of all
overriding royalty interests, production payments, burdens, liens, and other
encumbrances.





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Article 5 - Ownership of
Production





Production
from each well drilled on a Prospect Area will be owned pursuant to the terms of
this Agreement and the Operating Agreement for such Prospect Area.





Article 6 -
Insurance





In
connection with any drilling and/or production operations on a Prospect Area,
the Operator shall carry the type and amount of insurance required by the
Operating Agreement for such Prospect Area.  No other insurance shall
be required of the Operator hereunder.








Article 7 -
Confidentiality





Except
for required disclosures, including but not limited to disclosures to
governmental agencies and/or stock exchanges, or as otherwise provided in the
Operating Agreement, no Party shall release any geological, geophysical, or
reservoir information or any logs or other information pertaining to the
progress, tests, or results of any well drilled pursuant to this Agreement,
without the prior approval of the other Party.





Article 8 -
Conflicts





In the
event of any conflict between the terms and conditions as set forth herein and
the terms and conditions set forth in the Operating Agreement, the terms and
condition set forth herein shall control.





Article 9 – Force
Majeure





In the event Newfield is rendered
unable, wholly or impart, by a Force Majeure event (as hereinafter defined) to
carry out its obligations under this Agreement, Newfield shall give Ridgewood
prompt written notice of the Force Majeure with reasonably full particulars
concerning it; thereupon the obligations of Newfield; and insofar as they are
affected by the Force Majeure, shall be suspended during the continuance of such
Force Majeure.  The term “Force Majeure” as here
employed, shall include, but not necessarily be limited to, an act of God,
strike, lockout or other industrial disturbance, act of public enemy, war,
blockade, public riot, lightning, fire, storm, flood, explosion, the inability
or unavoidable delay in obtaining lessor's approval for any drillsite locations
on a Prospect Area, governmental permits or authorizations for drilling or other
operations to be conducted hereunder, any other governmental action,
governmental delay, restraint or in action, or the unavailability of equipment
and any other cause, whether of the kind specifically enumerated above or
otherwise, which is not reasonably within the control of Newfield.





Article 10 -
Notices





All notices, requests or demands to be
given under this Agreement shall be in writing and shall be deemed to have been
given (i) three (3) business days after being sent by registered mail or
certified mail, postage prepaid, or (ii) on the day sent, if hand delivered or
sent by facsimile, with receipt confirmed and verbal confirmation, in each case
addressed as follows or to such other address as may have been furnished in
writing to the other Parties hereto in accordance herewith:





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   If to Newfield:
              If to
      Ridgewood:Newfield Exploration
      Company
              Ridgewood Energy
      Corporation363 N. Sam Houston
      Pkwy. E., Suite 2020
              11700 Katy Freeway ,
      Suite 280Houston,
      Texas  77060
              Houston,
      Texas  77079Attention:  Ms.
      Christina Linscomb
              Attn: Mr. W. Greg
      TaborOffice
      Phone:
              (281)
      847-6074
              Office
      Phone:
              (281)
    293-8449Fax Number:
              (281)
      405-4207
              Fax
      Number:
              (281)
      293-7705





Article 11 - Topical
Headings





Topical
headings appearing at the top of each numbered article have been inserted for
convenience only and are to be given no force or affect whatsoever in the
interpretation of this Agreement.





Article 12 - Successors and
Assigns





The
rights and obligations of Ridgewood under this Agreement are not assignable, in
whole or in part, without the prior written consent of Newfield, which such
consent shall not be unreasonably withheld.  This Agreement shall be
binding upon each Party and their successors and assigns. Any assignment by a
Party of any lands affected by this Agreement shall be made expressly subject to
this Agreement, and the assignee shall expressly agree to assume and comply
with, the terms and provisions of this Agreement and the applicable Operating
Agreement.








Article 13 -
Miscellaneous





13.1         This
Agreement is not intended to create, and shall not be construed to create a
relationship of partnership.  Notwithstanding any provision herein,
the rights and liabilities of the Parties hereunder shall be several and not
joint or collective.





13.2         THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.





13.3         Ridgewood
understands that Newfield makes no express warranty and disclaims all implied
warranties and all statutory warranties as to (i) the accuracy or completeness
of the data furnished by Newfield as to the Contract Area, (ii) the presence of
hydrocarbons in the Contract Area, or (iii) the results which might be expected
from any exploration, development, production, and/or hydrocarbon marketing
activities contemplated in a Contract Area.  Nothing contained in the
technical information provided by Newfield shall be relied upon as a promise or
representation of warranty, whether as to the past or the future value of the
Contract Area.  Neither Newfield, nor its agents, representatives,
officers, directors or shareholders shall have any liability to Ridgewood or any
affiliate or associate of Ridgewood arising from the use by any person of such
technical information.





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13.4         This
Agreement and the exhibits attached hereto constitutes the entire Agreement
between the Parties with respect to the subject matter hereof, and supersedes
all prior oral or written agreements, commitments, or understandings between the
Parties, and there are no other representations or other agreements between the
Parties, except as expressly set forth herein.  No amendment shall be
binding unless in writing and signed by representatives of each
Party.





13.5         The
Parties agree to execute any additional instruments, agreements or documents
that are necessary to effectuate the intentions of this Agreement.








Article 14 -
Termination





This Agreement shall terminate as to
each Prospect Area upon (i) the mutual agreement of the Parties; (ii) failure to
commence actual drilling operations on a Test Well for such Prospect Area within
the time period specified in this Agreement; (iii) failure to commence the
drilling of a Substitute Well for such Prospect Area within the time period
specified in this Agreement; or (iv) the bankruptcy or insolvency of
Ridgewood.





Article 15 - Counterpart
Execution





This
Agreement may be executed by signing the original or a counterpart
thereof.  If this Agreement is executed in counterparts, all
counterparts taken together shall have the same effect as if all the Parties had
signed the same instrument.  However, this Agreement shall not be
effective as to any Party, until it has been executed by all
Parties.





IN
WITNESS WHEREOF, the Parties have duly executed this Agreement as of the
Effective Date hereinabove first written.




NEWFIELD EXPLORATION
      COMPANYBy:
                    /s/ W.M.
      BlumenshineW.M.
      BlumenshineVice
      President - Land


RIDGEWOOD ENERGY
      CORPORATIONBy:
              /s/ W.
      Greg TaborW.
      Greg TaborExecutive
      Vice President









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