Document:

Exhibit 10.2 

PARTICIPATION AGREEMENT 

[Redacted] PROSPECT

This Participation Agreement (“Agreement”) is entered into and made
effective this 1st day of July, 2008 (“Effective Date”) by and between Newfield Exploration Company
(“NEWFIELD”),
whose mailing address is 363 N. Sam Houston Pkwy E., Suite 2020 Houston, Texas
77060, and Ridgewood Energy Corporation (“RIDGEWOOD”),
whose mailing address is 11700 Katy Freeway, Suite 280 Houston, Texas 77079,
herein referred to collectively as “Parties” and individually as a “Party”. 

WITNESSETH

WHEREAS, NEWFIELD is
the owner of an undivided seventy-five percent (75%) record title interest in
and to each of the Oil and Gas Leases (collectively, the “Leases”) described as
follows: 

	
 

	
 

	
 

	
 

	
Oil and Gas Lease bearing [Redacted], effective [redacted], by and
 between the United States of America, as Lessor, and Newfield Exploration
 Company and Stone Energy Corporation, as Lessee, covering all of [Redacted],
 containing 5,760.00 acres more or less (hereinafter referred to as the “[Redacted
 Lease”), and 

	
 

	
 

	
 

	
 

	
 

	
Oil and Gas Lease bearing [Redacted], effective [redacted], by and
 between the United States of America, as Lessor, and Newfield Exploration
 Company and Stone Energy Corporation, as Lessee, covering all of [Redacted]
 containing 5,760.00 acres more or less (hereinafter referred to as the
 “[Redacted] Lease”), and 

	
 

	
 

	
 

	
 

	
 

	
Oil and Gas Lease bearing[Redacted], by and between the United States
 of America, as Lessor, and Newfield Exploration Company and Stone Energy
 Corporation, as Lessee, covering all of [Redacted], containing 5,760.00 acres
 more or less (hereinafter referred to as the “[Redacted] Lease”). 

	
 

WHEREAS, pursuant to
that certain Confidentiality Agreement dated effective September 4, 2008 by and
between NEWFIELD and RIDGEWOOD covering the Leases (the “Prospect CA”),
RIDGEWOOD reviewed certain confidential information supplied by NEWFIELD
relating to its [Redacted] Prospect that lies within the Leases (hereinafter
referred to as the “Prospect”) and RIDGEWOOD has advised NEWFIELD of its
election to participate in the drilling of the initial exploratory well on the
Prospect, subject to the receipt and approval of the formal authorization for
expenditure, and 

WHEREAS, NEWFIELD
and RIDGEWOOD desire to set forth the terms and conditions under which
RIDGEWOOD shall participate in certain operations to be conducted on the
Prospect to earn and be assigned an undivided 15% record title interest from
Newfield in and to the Leases; 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
1 

	
Participation Agreement

	
 

NOW, THEREFORE, for
and in consideration of the sum of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowled and confessed, together with the mutual covenants, conditions, and
obligations contained herein, NEWFIELD and RIDGEWOOD do hereby enter into this
Agreement under the following terms and conditions: 

ARTICLE I 

EXHIBITS

          The
following Exhibits are attached hereto and made a part of this Agreement: 

	
 

	
 

	
 

	
 

	
 

	
Exhibit
 “A-1”

	
 

	
Redacted

	
 

	
Exhibit
 “A-2”

	
 

	
Redactedl

	
 

	
Exhibit “B”

	
 

	
Operating
 Agreement

	
 

	
Exhibit “C”

	
 

	
Geologic and
 data information requirements of RIDGEWOOD

	
 

	
Exhibit “D”

	
 

	
Form of
 Assignment

Article II 

Initial Test Well

          2.1
          Initial Test Well.
NEWFIELD, as operator under the Operating Agreement (defined in Article III
below), and subject to rig availability and obtaining all requisite permits,
agrees to use reasonable efforts to commence, or cause to be commenced, on or
before [Redacted], actual drilling of the [Redacted] (“ITW”) at an approximate
surface coordinate location of[Redacted]. The ITW is to be drilled as an
Exploratory Well (as such term is used in the Operating Agreement) to 22,000’
MD / TVD or a depth sufficient to test the stratigraphic equivalent of the
‘21,000’ and 22,000’ Sand’ (the “Objective Depth”), whichever is the lesser
depth. An Authority for Expenditure (“AFE”) for the ITW is attached to this
Agreement as Exhibit “A-1” (the “Approved AFE”) and by the execution hereof,
each of NEWFIELD and RIDGEWOOD agrees to participate in the drilling of the ITW
in accordance with the terms hereof. Contemporaneously with the execution of
this Agreement, RIDGEWOOD agrees to execute and deliver to NEWFIELD a
counterpart copy of the Approved AFE. 

          The failure
to timely commence the drilling of the ITW and the Parties agreement to
terminate this Agreement, shall result in the termination of this Agreement,
the return of the Cash Consideration by NEWFIELD to RIDGEWOOD and the
reassignment from RIDGEWOOD to NEWFIELD of all of its record title interest in
and to the Leases. Otherwise, there shall be no penalty for failure to timely
commence the drilling of the ITW. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
2 

	
Participation Agreement

	
 

          2.2
          Substitute Well.
In the event the ITW should encounter rock salt, heaving shale, excessive water
flow, excessive pressure, igneous or other impenetrable formation or other
conditions which would render further drilling impracticable or uneconomic and
preclude the ITW from reaching the Objective Depth, then and in such event
NEWFIELD shall have the exclusive option to propose within sixty (60) days
following the abandonment of the ITW drilling of a substitute well (“Substitute
Well”) therefore, provided same is drilled to the Objective Depth and under the
same terms and conditions as the ITW. RIDGEWOOD shall have no obligation to
participate in the Substitute Well; provided RIDGEWOOD shall have thirty (30)
days, or forty-eight (48) hours in the event that a rig is on location, from
receipt of the AFE for the Substitute Well to elect whether it shall
participate in such Substitute Well. Failure to respond within the time period
allowed shall be deemed to be an election not to participate in the Substitute
Well. In the event NEWFIELD does not propose a Substitute Well within the time
period provided for above, then RIDGEWOOD may propose the drilling of a
Substitute Well pursuant to the terms of the Operating Agreement. NEWFIELD or
Ridgewood shall have the continuing option to drill additional Substitute
Wells, provided that no more than sixty (60) days elapse between the date the
drilling rig was released from the last operation on such Substitute Well and
the commencement date of drilling operations for the next Substitute Well
drilled therefor. 

	
 

	
 

	
 

	
 

	
          2.2.1 If
 the ITW fails to reach its Objective Depth, and RIDGEWOOD’s share of costs
 and expenses incurred in connection with the ITW has not yet reached the
 Promote Cap, then: 

	
 

	
 

	
 

	
 

	
 

	
          (i) if a
 Substitute Well is proposed and RIDGEWOOD elects not to participate therein,
 then RIDGEWOOD shall pursuant to Article 4.3, reconvey to NEWFIELD a 15%
 record title interest in and to the Leases and this Agreement shall terminate
 and neither Party shall have any further obligations or liabilities
 hereunder, except with respect to the fulfillment of payment and indemnity
 obligations accrued prior to such termination; 

	
 

	
 

	
 

	
 

	
 

	
          (ii) if a
 Substitute Well is proposed and RIDGEWOOD does elect to participate therein, this
 Agreement shall remain in full force and effect as though the Substitute Well
 was the ITW; and 

	
 

	
 

	
 

	
 

	
 

	
          (iii) if
 a Substitute Well is proposed and RIDGEWOOD elects to participate therein, but
 such well is not drilled, RIDGEWOOD shall retain its undivided fifteen
 percent (15%) record title interest in and to the Leases previously conveyed
 by the Assignment hereunder and any future operations on the Prospect by the
 Parties shall be governed by the Operating Agreement. 

	
 

	
 

	
 

	
 

	
          2.2.2 If
 the ITW fails to reach its Objective Depth and RIDGEWOOD’s share of costs and
 expenses incurred in connection with the ITW has reached the Promote Cap,
 RIDGEWOOD shall retain its record title interest in and to the Leases
 received by the Assignment pursuant to Section 4.2 hereof, and the
 consequences of RIDGEWOOD’s election to participate or not to participate in
 the Substitute Well shall be governed by the provisions of Article 16 of the
 Operating Agreement as described below. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
3

	
Participation Agreement

	
 

Subject to Sections 2.2.1 and 2.2.2, in the event that a Substitute
Well is proposed by RIDGEWOOD and drilled in accordance with this Agreement,
the interest of any non-participating Party in the drilling of such Substitute Well
shall be subject to the terms and conditions of Article 16 of the Operating
Agreement as described below; however, notwithstanding anything to the contrary
in this Agreement, in the event NEWFIELD elects not to participate in the
drilling of a Substitute Well, and RIDGEWOOD bears all or a portion of such
Party’s interest in the Substitute Well, the acquired interest shall not be
subject to the acreage forfeiture provisions of the Operating Agreement, but
instead will be subject to the non-consent penalty percentages applicable to
Exploratory Operations as defined in the Operating Agreement Article 16.5.1.
Regardless of whether RIDGEWOOD elects to participate or not to participate in
a Substitute Well, NEWFIELD shall retain the Cash Consideration, as such term
is hereafter defined. 

          2.3
          ITW Drilling Costs.
RIDGEWOOD shall bear and pay thirty percent (30.0%) of the actual costs to
drill and test the ITW to Casing Point ; however, if prior to reaching Casing
Point the actual aggregate cost of the ITW, and any Substitute Well therefor,
exceeds one hundred percent (100%) of the dry hole cost estimate provided for
in the Approved AFE (“ Promote Cap”), RIDGEWOOD shall bear and pay fifteen
percent (15%) of the actual costs to drill and test the ITW thereafter. Casing
Point shall be defined as that point in time when the ITW (or Substitute Well
therefor) has reached its Objective Depth and all open hole logs and tests have
been conducted in accordance with the Approved AFE. If RIDGEWOOD elects to
participate in a Substitute Well, any cost to drill the ITW will be carried
over to the Substitute Well to calculate the Promote Cap for purposes of
determining when RIDGEWOOD’s cost-bearing interest reduces to fifteen percent
(15%). Subject to the terms and conditions of this Agreement, all operations in
the ITW subsequent to Casing Point, shall be conducted in accordance with the
terms and provisions of the Operating Agreement and, subject to participation
elections, shall be shared 15% by RIDGEWOOD and 85% by NEWFIELD et al, its
co-owner, and their successors and assigns. 

Article III 

Operating Agreement

          3.1
          Operating
Agreement. The Leases will be subject to that certain
Offshore Operating Agreement by and between NEWFIELD, as Operator, and the
Non-Operators designated therein, dated effective July 1, 2008 (the “Operating
Agreement”), which is attached hereto as Exhibit “B”, and which will govern operations
upon the Leases (subject to RIDGEWOOD’s right to earn an interest in the Leases
per this Agreement). At the time RIDGEWOOD executes this Agreement, RIDGEWOOD
shall also execute and deliver the Operating Agreement, at which time it shall
be deemed to be a party thereto. If there is a conflict between the terms and
conditions of this Agreement and the terms and conditions of the Operating
Agreement prior to the earlier of: (a) reaching the Objective Depth in the ITW
or (b) RIDGEWOOD’s costs and expenses incurred in the ITW and any Substitute
Well therefor reaching the Promote Cap, then the terms and conditions of this
Agreement shall control. Thereafter, the Operating Agreement shall control.
Notwithstanding the foregoing, the provisions of Article 27 of the Operating
Agreement (Area of Mutual Interest) will be applicable to the Parties hereto
from and after the Effective Date and should RIDGEWOOD be required to reassign
its interest in accordance with Article 4.3 of this Agreement then the Reassignment
will also include any and all rights or interest acquired by RIDGEWOOD, as
applicable, pursuant to said Article 27.

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
4

	
Participation Agreement

	
 

          3.2
          Prospect
Information. NEWFIELD, as Operator of the ITW, shall
provide RIDGEWOOD with any and all raw well data and information obtained
and/or results of analyses performed through the conduct of the drilling of any
wells by NEWFIELD on the Prospect in which RIDGEWOOD is a participant, as
further provided for in Exhibit “C”, and any additional data and/or information
that RIDGEWOOD may become entitled to pursuant to the terms of the Operating
Agreement. All data delivered to RIDGEWOOD as provided in this Section 3.2
shall be delivered to RIDGEWOOD pursuant to the Operating Agreement. 

Article IV. 

Cash Consideration and Assignment of Interest in Lease

          4.1
          Cash Consideration.
Within five (5) business days after the complete execution of this Agreement by
all Parties, RIDGEWOOD shall pay to NEWFIELD the sum of Two Million Four
Hundred and Thirty-two Thousand, Two Hundred and Fifty ($2,432,250.00) (the
“Cash Consideration”) by wire transfer to the account designated by NEWFIELD in
writing to RIDGEWOOD. Such Cash Consideration shall be nonrefundable in all
circumstances, except as otherwise provided for in Section 2.1 of this
Agreement.  

          4.2
          Assignment.
Within ten (10) business days after receipt by NEWFIELD of the Cash
Consideration, NEWFIELD shall deliver to RIDGEWOOD an assignment of an
undivided fifteen percent (15.00%) record title interest in and to the Leases
(the “Assignment”), subject to the
following: 

          (a)
          The Assignment
shall be free and clear of any burdens, liens or encumbrances by, through or
under NEWFIELD, but not otherwise, subject only to (i) a proportionate part of
the lessors’ reserved royalty under the Lease, (ii) a 2.0% of 8/8ths overriding
royalty interest reserved in favor of NEWFIELD, proportionately reduced by the
record title interest being conveyed by NEWFIELD , (iii) the Operating
Agreement and (iv) this Agreement. 

          (b)
          The Assignment
shall be effective [redacted], subject to Minerals Management Service (“MMS”) approval, and the
Parties shall use
the form of assignment attached hereto as Exhibit “D”. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
5

	
 Participation Agreement

	
 

          The
Assignment requires approval by the MMS. The assignee of the Assignment shall
promptly (i) file of record the Assignment in the adjacent parish or county
courthouse and (ii) file for approval with the MMS (or other applicable
governmental agencies) the Assignment. Should approval of the MMS (or any other
similar governmental agency having jurisdiction) be denied, the Party receiving
notice of such denial agrees to provide the other Party with written notice of
such occurrence, along with a copy of all associated written communications,
and the Parties agree to develop a revised form of assignment in an effort to
meet the MMS’ or other appropriate agency’s requirements for approval. In the
alternative, each Party shall execute and deliver, or cause to be executed and
delivered, such other documents and take such other actions as a Party may
reasonably request in an effort to comply with any such approval requirements. 

          4.3          Reassignment.
Subject to Article 2.2.1(i), RIDGEWOOD shall reconvey to NEWFIELD all of its
undivided fifteen percent (15%) record title interest in and to the Leases,
using a form of assignment similar to the Assignment (the “Reassignment”), in
the event the ITW fails to reach Objective Depth and RIDGEWOOD’s share of costs
and expenses incurred in connection with the ITW has not reached the RIDGEWOOD
Promote Cap, and a Substitute Well is not proposed within one (1) year from
abandonment of the ITW on the Leases. 

          The
Reassignment shall be made using the form of assignment attached hereto as
Exhibit “D” and shall be made free and clear of any burdens, liens or
encumbrances by, through, or under RIDGEWOOD, but not otherwise. The
Reassignment shall be delivered by RIDGEWOOD to NEWFIELD within fifteen (15)
days after receipt by RIDGEWOOD of a request from NEWFIELD for the
Reassignment. 

          4.4          Earning
Events. The Reassignment shall not be due, and
RIDGEWOOD shall be deemed to have earned its record title interest in and to
Leases, when the Promote Cap has been reached or upon the ITW being drilled to
Casing Point, whichever is the earliest to occur. 

Article V

Assignability

          5.            Rights
to Assign. In the event a Party is granted consent to
a proposed assignment, the assignment will be made expressly subject to this
Agreement and the assignee must agree in writing to be expressly bound by this
Agreement. The assignor of an assignment made under this Agreement shall remain
primarily liable for its obligations which have accrued prior to the latter of
i) the effective date of the assignment, or ii) the date the assignment is
physically delivered to the assignee. 

          After the
ratification of the Operating Agreement by RIDGEWOOD pursuant to Section 3.1 of
the Agreement, a Party’s right to assign its rights under this Agreement and in
the Leases shall be governed by the Operating Agreement. 

          Subject to
the restrictions on assignment as contained herein, the terms and conditions of
this Agreement shall inure to the benefit of and will be binding upon NEWFIELD
and RIDGEWOOD, and their respective successors and assigns. This Agreement
shall constitute a covenant running with the Leases. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
6

	
Participation Agreement

	
 

Article VI

Miscellaneous Provisions

          6.1          Governing
Law. THE PARTIES HERETO HEREBY AGREE THAT THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD
TO RULES CONCERNING CONFLICTS OF LAW. VENUE FOR ANY ACTION SHALL BE IN HARRIS
COUNTY, TEXAS. 

          6.2          Notices.
Any notices or provision of notices or disclosure, or
other communications that may be required or permitted hereunder shall be in
writing and shall be delivered by facsimile, in person or sent by United States
Mail, certified mail, postage prepaid, return receipt requested, or an
equivalent delivery service, addressed to the Parties at the following
respective addresses: 

	
 

	
 

	
 

	
 

	
Newfield Exploration Company

	
 

	
363 North Sam Houston Parkway East, Suite 2020

	
 

	
Houston, Texas 77060

	
 

	
Attention:

	
John D. Hamilton

	
 

	
Telephone:

	
(281) 847-6105

	
 

	
Facsimile:

	
(281) 847-6134

	
 

	
 

	
 

	
 

	
Ridgewood Energy Corporation

	
 

	
11700 Katy Freeway, Suite 280,

	
 

	
Houston, Texas 77079,

	
 

	
Attention:

	
Mr. W. Greg Tabor

	
 

	
Telephone:

	
(281) 293-8449

	
 

	
Facsimile

	
(281) 293-7705

          6.3          Relationship
of the Parties. It is not the
purpose or intention of this Agreement to create, and this Agreement will never
be construed as creating, a joint venture, mining partnership or other
relationship whereby any Party will be held liable for the acts, either of
omission or commission, of any other Party, and the liabilities of each of the
Parties hereto shall be several and not joint or collective. Solely for
purposes of federal income taxation and purposes of certain state income tax
laws which incorporate or follow federal income tax principals as to tax
partnerships, however, Each of the Parties hereto agrees not to elect, under
the authority of Section 761(a) of the Internal Revenue Code of 1986, to be
excluded from all the provisions of Subchapter K of Chapter I of Subtitle A of
said Internal Revenue Code of 1986. With regard to the resulting tax
partnership, the Parties hereby incorporate by this reference, as if set forth
herein in full, the tax partnership provisions set forth on Exhibit “J” to the
Operating Agreement, with the tax partners in such tax partnership being
NEWFIELD, RIDGEWOOD and the other parties to the Operating Agreement with the
Tax Reporting Partner being NEWFIELD. This Agreement and operations hereunder
relate solely to the Prospect, and no Party hereto shall have any obligation of
any kind to any other Party hereto as to any other lease, land or minerals
(whether in the vicinity of the Lease or not) by virtue of this Agreement or
such operations or otherwise except as may be provided in the Operating
Agreement, Article III hereof or evidenced by written agreement of such
Parties.  

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
7

	
Participation Agreement

	
 

          6.4          Rentals.
To the best of NEWFIELD’s knowledge, as of the
effective date of the assignment, all rentals and any other payments due
pursuant to the terms of the Leases subject to this Agreement have been
properly and timely paid and said Leases are now in full force and effect as of
the Effective Date. As of the Effective Date of this Agreement, RIDGEWOOD will
be responsible for its prorata share of the rentals on the Leases. 

          6.5          Further
Assurances. Following execution of the Assignment,
each Party agrees to execute and deliver to the other any instruments or other
documents necessary to carry out the intent and obligations of this Agreement. 

          6.6          Conflicts.
Except as provided for in Article 3.1, in the event of any conflicts or
inconsistencies between the provisions of this Agreement and any other
agreement, including any agreement referenced herein to be executed by the
Parties hereafter, the provisions of this Agreement shall control to the extent
of such conflict. 

          6.7          Entire
Agreement. This Agreement together with the
instruments referred to herein and the Exhibits attached hereto, embody the
entire agreement between the Parties with regard to the subject matter hereof,
and supersede all other prior agreements, arrangements, understandings,
negotiations and discussions, whether oral or written between the Parties
relating to the subject matter hereof, including without limitation, the
Prospect CA executed by the Parties. There are no warranties, representations
or other agreements between the Parties in connection with the subject matter
hereof except as specifically set forth in this Agreement or in subsequent
documents delivered pursuant thereto. This Agreement may be supplemented,
altered, amended, modified or revoked only in writing, signed by all Parties
hereto. 

          6.8          Arbitration:
This Agreement is subject to the arbitration
provisions of the Operating Agreement.

          6.9          Severability.
If any provision of this Agreement is held invalid,
the remainder of the Agreement shall not be affected thereby unless the effect
thereof would be to materially alter the burdens or benefits intended by the
Parties by the express language of this Agreement. 

          6.10        Captions.
The captions in this Agreement are for convenience only and shall not be
considered a part hereof of affect the construction or interpretation of any
provision of this Agreement. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
8

	
Participation Agreement

	
 

          6.11          Force
Majeure. All obligations imposed by this Agreement on
each Party, except for payment of money, shall be suspended and all periods of
time for exercising any rights hereunder shall be extended while compliance is
prevented, in whole or in part, by Force Majeure. “Force Majeure” shall mean a
labor dispute; explosion; fire; storm, hurricane, loop currents, and high seas;
floods; wars; civil disturbance; act of god; laws; governmental rules,
regulations, orders, action or delay; inability to secure materials after
reasonable efforts; or any other similar cause beyond the reasonable control of
the Party claiming relief hereunder; provided, however, that such Party shall
promptly take all reasonable action to remove the Force Majeure, and provided
that no Party shall be required against its will to settle any labor dispute. 

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

          6.13          Wavier
Period. No wavier by any Party or any default,
misrepresentation, or breach of warranty, or covenant will be deemed to extend
to any prior or subsequent default, misrepresentation or breach of warranty or
covenant. 

          6.14          Counterpart
Execution. This Agreement may be executed in
counterparts and each such counterpart shall have the same force and effect as
the original hereof, provided, however, that none of said counterparts shall be
effective until all parties hereto have executed a counterpart hereof. 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
9

	
Participation Agreement

	
 

          IN WITNESS WHEREOF, the
Parties hereto have
executed this Agreement as of the date first hereinabove written. 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
WITNESSES:

	
 

	
Newfield Exploration Company

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ W. M.  BLUMENSHINE

	
 

	
 

	 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
W. M.  Blumenshine

	
 

	
 

	 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
Vice
 President

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Date:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
WITNESSES:

	
 

	
RIDGEWOOD ENERGY CORPORATION

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
By

	
/s/ W. GREG TABOR

	
 

	 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Name:

	
W. Greg  Tabor

	
 

	 

	
 

	
 

	
 

	 
	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Title:

	
Executive Vice President

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Date:

	
 

	
 

	
 

	
 

	
 

	
 

	 

	
 

	
 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
10

	
Participation Agreement

	
 

Exhibit “A-1”
Attached to and made a part of that certain
Participation Agreement
effective

November 1, 2008 by and between Newfield Exploration Company and Ridgewood
Energy Corporation 

[Redacted]

[AFE to Come]

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
11

	
Participation Agreement

	
 

Exhibit “A-2”
Attached to and made a part of that certain
Participation Agreement
effective

November 1, 2008 by and between Newfield Exploration Company and Ridgewood
Energy Corporation 

[Redacted]

[Well Plan to Come]

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
12

	
Participation Agreement

	
 

Exhibit “B”

Attached to and made a part of that certain Participation Agreement effective

November 1, 2008 by and between Newfield Exploration Company and Ridgewood
Energy Corporation

OPERATING AGREEMENT

[Operating Agreement to Come]

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
13

	
 Participation Agreement

	
 

Exhibit “C” 

Attached to and made a part of that certain Participation Agreement effective 

November 1, 2008 by and between Newfield Exploration Company and Ridgewood
Energy Corporation

GEOLOGIC AND DATA INFORMATION
REQUIREMENTS OF RIDGEWOOD
ENERGY

CORPORATION

WELL INFORMATION REQUIREMENTS

FOR:

Ridgewood Energy Corporation

11700 Katy Freeway,
Suite 280

Houston, Texas 77079

Phone: (281) 293-8449 Fax: (281) 293-7705

WELL NAME: [Redacted] 

	
 

	
 

	
[Redacted] Prospect
 Ridgewood Energy Corporation

	
14

	
Participation
 AgreementExhibit
10.3 

    

     

    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 (“REDACTED
Lease”);

    

    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 (“REDACTED
Lease”); 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 (“REDACTED
Lease”);

    

    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 Interests

              
	 	 
	Newfield 	
                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 (“Redacted Test
Well”), and (c) [REDACTED] (“Redacted Test 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”).

    

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

       

    

    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.

    

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

    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.

    

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    

    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:

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

      
      

       

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

    

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

       

    

    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
      COMPANY	 
	 	 	 
	 	 	 
	
                      By:
      

                    	    /s/ W.M.
      Blumenshine	 
	 	
                      W.M.
      Blumenshine

                    	 
	 	
                      Vice
      President - Land

                    	 
	 	 	 

            

          

        

      

    
      
        	RIDGEWOOD ENERGY
      CORPORATION	 
	 	 	 
	 	 	 
	
                By:
      

              	    /s/ W.
      Greg Tabor	 
	 	
                W.
      Greg Tabor

              	 
	 	
                Executive
      Vice President

              	 
	 	 	 

      

    

     

    

     

     -7-

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