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Ridgewood Energy U Fund

Document and Entity Information

Document and Entity Information - shares9 Months Ended
Sep. 30, 2021Nov. 08, 2021
Cover [Abstract]
Document Type10-Q
Amendment Flagfalse
Document Period End DateSep. 30,
2021
Entity Registrant NameRidgewood Energy U Fund, LLC
Entity Central Index Key0001377178
Current Fiscal Year End Date--12-31
Document Fiscal Year Focus2021
Document Fiscal Period FocusQ3
Entity Filer CategoryNon-accelerated Filer
Entity Small Businesstrue
Entity Shell Companyfalse
Entity Emerging Growth Companyfalse
Entity Common Stock, Shares Outstanding486.4825
Entity File Number000-52583
Entity Interactive Data CurrentYes
Document Quarterly Reporttrue
Document Transition Reportfalse
Entity Current Reporting StatusYes
Entity Incorporation, State or Country CodeDE
City Area Code800
Local Phone Number942-5550
Entity Address Line One14 Philips Parkway
Entity Address City or TownMontvale
Entity Address State or ProvinceNJ
Entity Address Postal Zip Code07645
Entity Tax Identification Number20-5464059

UNAUDITED CONDENSED BALANCE SHE

UNAUDITED CONDENSED BALANCE SHEETS - USD ($) $ in ThousandsSep. 30, 2021Dec. 31, 2020
Current assets:
Cash and cash equivalents $ 1,461 $ 1,556
Salvage fund83 90
Production receivable166 376
Other current assets25 12
Total current assets1,735 2,034
Salvage fund1,576 1,555
Investment in Delta House119 119
Oil and gas properties:
Proved properties9,474 9,448
Less: accumulated depletion and amortization(7,097)(6,681)
Total oil and gas properties, net2,377 2,767
Total assets5,807 6,475
Current liabilities:
Due to operators70 85
Accrued expenses65 47
Asset retirement obligations83 90
Total current liabilities218 222
Asset retirement obligations816 1,116
Total liabilities1,034 1,338
Members' capital:
Distributions(3,225)(2,868)
Retained earnings2,186 1,867
Manager's total(1,039)(1,001)
Capital contributions (1,000 shares authorized; 486.4825 issued and outstanding)72,381 72,381
Syndication costs(8,541)(8,541)
Distributions(20,564)(18,540)
Accumulated deficit(37,464)(39,162)
Shareholders' total5,812 6,138
Total members' capital4,773 5,137
Total liabilities and members' capital $ 5,807 $ 6,475

UNAUDITED CONDENSED BALANCE S_2

UNAUDITED CONDENSED BALANCE SHEETS (Parenthetical) - sharesSep. 30, 2021Dec. 31, 2020
Statement of Financial Position [Abstract]
Shares authorized1,000 1,000
Shares issued486.4825 486.4825
Shares outstanding486.4825 486.4825

UNAUDITED CONDENSED STATEMENTS

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands3 Months Ended9 Months Ended
Sep. 30, 2021Sep. 30, 2020Sep. 30, 2021Sep. 30, 2020
Revenue
Oil and gas revenue $ 840 $ 423 $ 3,071 $ 1,954
Expenses
Depletion and amortization(192)96 110 477
Operating expenses284 137 681 723
Management fees to affiliate (Note 2)59 59 176 176
General and administrative expenses43 35 114 114
Total expenses194 327 1,081 1,490
Income from operations646 96 1,990 464
Other income
Dividend income8 3 27 21
Interest income 7
Total other income8 3 27 28
Net income654 99 2,017 492
Manager Interest
Net income72 29 319 141
Shareholder Interest
Net income $ 582 $ 70 $ 1,698 $ 351
Net income per share $ 1,197 $ 145 $ 3,491 $ 721

UNAUDITED CONDENSED STATEMENT_2

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN PARTNERS CAPITAL - USD ($) $ in Thousands# of Shares [Member]Manager [Member]Shareholders [Member]Total
Balances at Dec. 31, 2019 $ (1,046) $ 6,485 $ 5,439
Balances, shares at Dec. 31, 2019486.4825
Distributions(116)(660)(776)
Net income (loss)104 379 483
Balances at Mar. 31, 2020(1,058)6,204 5,146
Balances, shares at Mar. 31, 2020486.4825
Balances at Dec. 31, 2019(1,046)6,485 5,439
Balances, shares at Dec. 31, 2019486.4825
Distributions(200)
Net income (loss)492
Balances at Sep. 30, 2020(1,058)5,970 4,912
Balances, shares at Sep. 30, 2020486.4825
Balances at Mar. 31, 2020(1,058)6,204 5,146
Balances, shares at Mar. 31, 2020486.4825
Net income (loss)8 (98)(90)
Balances at Jun. 30, 2020(1,050)6,106 5,056
Balances, shares at Jun. 30, 2020486.4825
Distributions(37)(206)(243)
Net income (loss)29 70 99
Balances at Sep. 30, 2020(1,058)5,970 4,912
Balances, shares at Sep. 30, 2020486.4825
Balances at Dec. 31, 2020(1,001)6,138 $ 5,137
Balances, shares at Dec. 31, 2020486.4825 486.4825
Distributions(102)(577) $ (679)
Net income (loss)125 560 685
Balances at Mar. 31, 2021(978)6,121 5,143
Balances, shares at Mar. 31, 2021486.4825
Balances at Dec. 31, 2020(1,001)6,138 $ 5,137
Balances, shares at Dec. 31, 2020486.4825 486.4825
Distributions(400)
Net income (loss) $ 2,017
Balances at Sep. 30, 2021(1,039)5,812 $ 4,773
Balances, shares at Sep. 30, 2021486.4825 486.4825
Balances at Mar. 31, 2021(978)6,121 $ 5,143
Balances, shares at Mar. 31, 2021486.4825
Distributions(130)(741)(871)
Net income (loss)122 556 678
Balances at Jun. 30, 2021(986)5,936 4,950
Balances, shares at Jun. 30, 2021486.4825
Distributions(125)(706)(831)
Net income (loss)72 582 654
Balances at Sep. 30, 2021 $ (1,039) $ 5,812 $ 4,773
Balances, shares at Sep. 30, 2021486.4825 486.4825

UNAUDITED CONDENSED STATEMENT_3

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands9 Months Ended
Sep. 30, 2021Sep. 30, 2020
Cash flows from operating activities
Net income $ 2,017 $ 492
Adjustments to reconcile net income to net cash provided by operating activities:
Depletion and amortization110 477
Accretion expense11 12
Changes in assets and liabilities:
Decrease in production receivable210 332
Increase in other current assets(13)(8)
Decrease in due to operators(15)(121)
Increase in accrued expenses18 7
Settlement of asset retirement obligations(13)(65)
Net cash provided by operating activities2,325 1,126
Cash flows from investing activities
Capital expenditures for oil and gas properties(25)(134)
Proceeds from salvage fund13
(Increase) decrease in salvage fund(27)40
Net cash used in investing activities(39)(94)
Cash flows from financing activities
Distributions(2,381)(1,019)
Net cash used in financing activities(2,381)(1,019)
Net (decrease) increase in cash and cash equivalents(95)13
Cash and cash equivalents, beginning of period1,556 1,345
Cash and cash equivalents, end of period $ 1,461 $ 1,358

Organization and Summary of Sig

Organization and Summary of Significant Accounting Policies9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Organization and Summary of Significant Accounting Policies1. Organization and Summary of Significant Accounting Policies Organization The Ridgewood Energy U Fund, LLC (the “Fund”), a Delaware limited liability company, was formed on August 28, 2006 and operates pursuant to a limited liability company agreement (the “LLC Agreement”) dated as of October 1, 2006 by and among Ridgewood Energy Corporation (the “Manager”) and the shareholders of the Fund, which addresses matters such as the authority and voting rights of the Manager and shareholders, capitalization, transferability of membership interests, participation in costs and revenues, distribution of assets and dissolution and winding up. The Fund was organized to primarily acquire interests in oil and 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. The Manager performs, or arranges for the performance of, the management, advisory and administrative services required for the Fund’s operations. Such services include, without limitation, the administration of shareholder accounts, shareholder relations, the preparation, review and dissemination of tax and other financial information and the management of the Fund’s investments in projects. In addition, the Manager provides office space, equipment and facilities and other services necessary for the Fund’s operations. The Manager also engages and manages contractual relations with unaffiliated custodians, depositories, accountants, attorneys, corporate fiduciaries, insurers, banks and others as required. See Notes 2 and 3. 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, changes in members’ capital 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 financial position, results of operations, changes in members’ capital 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, 2020 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K (“2020 Annual Report”) filed with the Securities and Exchange Commission (“SEC”). The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2020, but does not include all annual disclosures required by GAAP. Use of Estimates The preparation of financial statements in accordance 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, management reviews its estimates, including those related to the fair value of financial instruments, depletion and amortization, determination of proved reserves, impairment of long-lived assets and asset retirement obligations. Actual results may differ from those estimates. Summary of Significant Accounting Policies The Fund has provided discussion of significant accounting policies in Note 1 of “Notes to Financial Statements” – “Organization and Summary of Significant Accounting Policies” contained in Item 8. “Financial Statements and Supplementary Data” within its 2020 Annual Report. There have been no significant changes to the Fund’s significant accounting policies during the three and nine months ended September 30, 2021. Fair Value Measurements The Fund follows the accounting guidance for fair value measurement for measuring fair value of assets and liabilities in its financial statements. The Fund’s financial assets and liabilities consist of cash and cash equivalents, salvage fund, production receivable, other current assets, investment in Delta House, due to operators and accrued expenses. Except for investment in Delta House, the carrying amounts of these financial assets and liabilities approximate fair value due to their short-term nature. The Fund’s investment in Delta House is valued using the measurement alternative for investment in other entities (see Investment in Delta House
5 Table of Contents Investment in Delta House The Fund has investments in Delta House Oil and Gas Lateral, LLC and Delta House FPS, LLC (collectively “Delta House”), legal entities that own interests in a deepwater floating production system operated by Murphy Exploration & Production Company - USA. The investment in Delta House is valued using the measurement alternative to record the investment at cost, less impairment and plus or minus subsequent adjustments for observable price changes with change in basis reported in current earnings. At each reporting period, the Fund reviews its investment in Delta House to evaluate whether the investment is impaired. During each of the three and nine months ended September 30, 2021 and 2020, there were no impairments of the Fund’s investment in Delta House. Asset Retirement Obligations For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired. Upon the determination that a property is either proved or dry, a retirement obligation is incurred. The Fund recognizes the fair value of a liability for an asset retirement obligation in the period incurred based on expected future cash outflows required to satisfy the obligation discounted at the Fund’s credit-adjusted risk-free rate. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs. Annually, or more frequently if an event occurs that would dictate a change in assumptions or estimates underlying the obligations, the Fund reassesses its asset retirement obligations to determine whether any revisions to the obligations are necessary. The Fund maintains a salvage fund to provide for the funding of future asset retirement obligations. The following table presents changes in asset retirement obligations for the following periods:
Nine months ended September 30,
2021
2020
(in thousands)
Balance, beginning of period
$
1,206
$
1,275
Liabilities settled
(13
)
(65
)
Accretion expense
11
12
Revision of estimates
(305
)
-
Balance, end of period
$
899
$
1,222
During the nine months ended September 30, 2021, the Fund recorded credits to depletion expense totaling $0.3 million primarily related to an adjustment to the asset retirement obligation for a fully depleted property. Revenue Recognition Oil and gas revenues from contracts with customers are recognized at the point when control of oil and natural gas is transferred to the customers in accordance with Accounting Standard Codification Topic 606, Revenue from Contracts with Customers The Fund also has an estimation process for revenue and related accruals, and any identified difference between its revenue estimates and actual revenue has not been significant. During each of the three and nine months ended September 30, 2021 and 2020, revenue recognized from performance obligations satisfied in previous periods was not significant. Allowance for Credit Losses The Fund is exposed to credit losses through the sale of oil and natural gas to customers. However, the Fund only sells to a small number of major oil and gas companies that have investment-grade credit ratings. Based on historical collection experience, current and future economic and market conditions and a review of the current status of customers' production receivables, the Fund has not recorded an expected loss allowance as there are no past due receivable balances or projected credit losses. The Fund considered the current and expected future economic and market conditions surrounding the Coronavirus (“COVID-19”) pandemic and determined based on the composition of its customer base, there was no related credit loss impact.
6 Table of Contents Impairment of Long-Lived Assets The Fund reviews the carrying value of its oil and gas properties for impairment whenever events and circumstances indicate that the recorded carrying value of its oil and gas properties may not be recoverable. Recoverability is evaluated by comparing estimated future net undiscounted cash flows to the carrying value of the oil and gas properties at the time of the review. If the carrying value exceeds the estimated future net undiscounted cash flows, the carrying value of the oil and gas properties is impaired and written down to fair value. Fair value is determined using valuation techniques that include both market and income approaches and use Level 3 inputs. The fair value determinations require considerable judgment and are sensitive to change. Different pricing assumptions, estimates of oil and natural gas reserves and future development costs or discount rates could result in a significant impact on the amount of impairment. There were no impairments of oil and gas properties during each of the three and nine months ended September 30, 2021 and 2020. Fluctuations in oil and natural gas commodity prices may impact the fair value of the Fund’s oil and gas properties. In addition, significant declines in oil and natural gas commodity prices could reduce the quantities of reserves that are commercially recoverable, which could result in impairment. Recent Accounting Pronouncements The Fund has considered recent accounting pronouncements issued during the nine months ended September 30, 2021 or through the filing of this report, and the Fund has not identified new standards that it believes will have an impact on the Fund’s financial statements.

Related Parties

Related Parties9 Months Ended
Sep. 30, 2021
Related Party Transactions [Abstract]
Related Parties2. Related Parties Pursuant to the terms of the LLC Agreement, the Manager is entitled to receive an annual management fee, payable monthly, of 2.5% of total capital contributions, net of cumulative dry-hole well costs incurred by the Fund and fully depleted project investments. In 2012, the Manager elected to reduce its management fee to 1% annually, however, the Manager is still permitted to waive all or a portion of the reduced management fee at its own discretion. Therefore, all or a portion of the reduced management fee may be temporarily waived to accommodate the Fund’s short-term commitments. Management fees during each of the three and nine months ended September 30, 2021 and 2020 were $0.1 million and $0.2 million, respectively. The Manager is also entitled to receive 15% of the cash distributions from operations made by the Fund. Distributions paid to the Manager during the three and nine months ended September 30, 2021 were $0.1 million and $0.4 million, respectively. Distributions paid to the Manager during the three and nine months ended September 30, 2020 were $37 thousand and $0.2 million, respectively. The Fund utilizes DH Sales and Transport, LLC, a wholly-owned subsidiary of the Manager, to facilitate the transportation and sale of oil and natural gas produced from the Diller and Marmalard projects. At times, short-term payables and receivables, which do not bear interest, arise from transactions with affiliates in the ordinary course of business. The Fund has working interest ownership in certain oil and natural gas projects, which are also owned by other entities that are likewise managed by the Manager.

Commitments and Contingencies

Commitments and Contingencies9 Months Ended
Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies3. Commitments and Contingencies Capital Commitments As of September 30, 2021, the Fund’s estimated capital commitments related to its oil and gas properties were $3.5 million (which include asset retirement obligations for the Fund’s projects of $1.5 million), of which $0.2 million is expected to be spent during the next twelve months primarily related to the settlement of asset retirement obligation for one of the Fund’s projects and additional development of the Diller Project. Future results of operations and cash flows are dependent on the ongoing development of and revenues from production and sale of oil and gas from the Fund’s producing projects.
7 Table of Contents Based upon its current cash position, salvage fund and its current reserve estimates, the Fund expects cash flow from operations to be sufficient to cover its commitments and ongoing operations. Reserve estimates are projections based on engineering data that cannot be measured with precision, require substantial judgment, and are subject to frequent revision. However, if cash flow from operations is not sufficient to meet the Fund’s commitments, the Manager may temporarily suspend distributions to accommodate the Fund’s short-term commitments if needed. Impact from COVID-19 The COVID-19 pandemic remains a global health crisis and continues to cause uncertainty in financial and commodity markets. The ultimate extent of the impact of the COVID-19 pandemic and resulting market disruption to the Fund’s operating results and cash flows continue to be unknown and unpredictable. Although, oil and natural gas commodity prices have improved from historic lows in 2020, the period of low oil and natural gas commodity prices during 2020 negatively impacted cash flow generated by the Fund’s projects. However, because the Fund owns its oil and gas properties with no debt and these projects are long-lived assets that are expected to produce over many years with relatively low operating costs, the Fund believes that it is positioned to weather this period of uncertainty and volatility from the COVID-19 pandemic. If oil and natural gas commodity prices and the overall global economy, including financial markets therein, are further adversely impacted by the COVID-19 pandemic for a prolonged period, the Fund, its operators and other working interest partners’ financial performance results will be materially adversely affected, which could significantly affect the Fund’s liquidity, development of oil and gas and expected operating results. It is likely that estimates of oil and gas products that can be economically produced will be reduced, which increases the likelihood of future impairments and higher depletion rates. Environmental and Governmental Regulations Many aspects of the oil and gas industry are subject to federal, state and local environmental laws and regulations. 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. 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. As of September 30, 2021 and December 31, 2020, there were no known environmental contingencies that required adjustment to, or disclosure in, the Fund’s financial statements. Oil and gas industry legislation and administrative regulations are periodically changed for a variety of political, economic, and other reasons. Any such future laws and regulations could result in increased compliance costs or additional operating restrictions, which could have a material adverse effect on the Fund’s operating results and cash flows. It is not possible at this time to predict whether such legislation or regulation, if proposed, will be adopted as initially written, if at all, or how legislation or new regulation that may be adopted would impact the Fund’s business. BOEM Supplemental Financial Assurance Requirements On July 14, 2016, the Bureau of Ocean Energy Management (“BOEM”) issued a Notice to Lessees (“NTL 2016-N01”) that discontinued and materially replaced existing policies and procedures regarding financial security (i.e. supplemental bonding) for decommissioning obligations of lessees of federal oil and gas leases and owners of pipeline rights-of-way, rights-of-use and easements on the Outer Continental Shelf (“Lessees”). Generally, NTL 2016-N01 (i) ended the practice of excusing Lessees from providing such additional security where co-lessees had sufficient financial strength to meet such decommissioning obligations, (ii) established new criteria for determining financial strength and additional security requirements of such Lessees, (iii) provided acceptable forms of such additional security, and (iv) replaced the waiver system with one of self-insurance. The rule became effective as of September 12, 2016; however, on January 6, 2017, the BOEM announced that it was suspending the implementation timeline for six months in certain circumstances. On May 1, 2017, the Secretary of the U.S. Department of the Interior (“Interior”) directed the BOEM to complete a review of NTL 2016-N01, to provide a report to certain Interior personnel describing the results of the review and options for revising or rescinding NTL 2016-N01, and to keep the implementation timeline extension in effect pending the completion of the review of NTL 2016-N01 by the identified Interior personnel. The BOEM is not currently implementing NTL 2016-N01 and its status is uncertain. Notwithstanding the uncertain status of NTL 2016-N01, BOEM had continued under existing law to review supplemental financial assurance requirements relative to sole liability properties (i.e., properties in which only one company is liable for decommissioning). However, on August 18, 2021, the BOEM issued a Note to Stakeholders in which the BOEM stated that it was expanding its financial assurance efforts beyond sole liability projects to include “supplemental financial assurance of certain high-risk, non-sole liability properties” (those properties with more than one company potentially liable for decommissioning costs). The BOEM identified (i) inactive properties, (ii) those with less than five years of production left, and (iii) those with damaged infrastructure, as being high-risk, non-sole liability properties and for which supplemental financial assurance may be required. The BOEM may require the Fund to fully secure all of its potential abandonment liabilities, which potentially could increase costs to the Fund.
8 Table of Contents On October 16, 2020, BOEM and the Bureau of Safety and Environmental Enforcement published a proposed new rule at 85 FR 65904 on Risk, Management, Financial Assurance and Loss Prevention, addressing the streamlining of evaluation criteria when determining whether oil, gas and sulfur leases, right-of-use and easement grant holders, and pipeline right-of-way grant holders may be required to provide bonds or other security above the prescribed amounts for base bonds to ensure compliance with the Lessees’ obligations, primarily decommissioning obligations. The proposed rule was significantly less stringent with respect to financial assurance than NTL 2016-N01. To date, however, Interior has not issued a final rule but has indicated that it is reviewing the proposed rule. The Fund is not able to evaluate the impact of the proposed new rule on its operations or financial condition until a final rule is issued or some other definitive action is taken by the Interior or BOEM. Insurance Coverage The Fund is subject to all risks inherent in the oil and natural gas business. 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 a material adverse impact upon earnings and financial position. Moreover, insurance is obtained as a package covering all of the entities managed by the Manager. Depending on the extent, nature and payment of claims made by the Fund or other entities managed by the Manager, yearly insurance coverage may be exhausted and become insufficient to cover a claim by the Fund in a given year.

Organization and Summary of S_2

Organization and Summary of Significant Accounting Policies (Policies)9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of PresentationBasis 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, changes in members’ capital 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 financial position, results of operations, changes in members’ capital 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, 2020 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K (“2020 Annual Report”) filed with the Securities and Exchange Commission (“SEC”). The year-end condensed balance sheet data was derived from audited financial statements for the year ended December 31, 2020, but does not include all annual disclosures required by GAAP.
Use of EstimatesUse of Estimates The preparation of financial statements in accordance 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, management reviews its estimates, including those related to the fair value of financial instruments, depletion and amortization, determination of proved reserves, impairment of long-lived assets and asset retirement obligations. Actual results may differ from those estimates.
Fair Value MeasurementsFair Value Measurements The Fund follows the accounting guidance for fair value measurement for measuring fair value of assets and liabilities in its financial statements. The Fund’s financial assets and liabilities consist of cash and cash equivalents, salvage fund, production receivable, other current assets, investment in Delta House, due to operators and accrued expenses. Except for investment in Delta House, the carrying amounts of these financial assets and liabilities approximate fair value due to their short-term nature. The Fund’s investment in Delta House is valued using the measurement alternative for investment in other entities (see Investment in Delta House
Investment in Delta HouseInvestment in Delta House The Fund has investments in Delta House Oil and Gas Lateral, LLC and Delta House FPS, LLC (collectively “Delta House”), legal entities that own interests in a deepwater floating production system operated by Murphy Exploration & Production Company - USA. The investment in Delta House is valued using the measurement alternative to record the investment at cost, less impairment and plus or minus subsequent adjustments for observable price changes with change in basis reported in current earnings. At each reporting period, the Fund reviews its investment in Delta House to evaluate whether the investment is impaired. During each of the three and nine months ended September 30, 2021 and 2020, there were no impairments of the Fund’s investment in Delta House.
Asset Retirement ObligationsAsset Retirement Obligations For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired. Upon the determination that a property is either proved or dry, a retirement obligation is incurred. The Fund recognizes the fair value of a liability for an asset retirement obligation in the period incurred based on expected future cash outflows required to satisfy the obligation discounted at the Fund’s credit-adjusted risk-free rate. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs. Annually, or more frequently if an event occurs that would dictate a change in assumptions or estimates underlying the obligations, the Fund reassesses its asset retirement obligations to determine whether any revisions to the obligations are necessary. The Fund maintains a salvage fund to provide for the funding of future asset retirement obligations. The following table presents changes in asset retirement obligations for the following periods:
Nine months ended September 30,
2021
2020
(in thousands)
Balance, beginning of period
$
1,206
$
1,275
Liabilities settled
(13
)
(65
)
Accretion expense
11
12
Revision of estimates
(305
)
-
Balance, end of period
$
899
$
1,222
During the nine months ended September 30, 2021, the Fund recorded credits to depletion expense totaling $0.3 million primarily related to an adjustment to the asset retirement obligation for a fully depleted property.
Revenue RecognitionRevenue Recognition Oil and gas revenues from contracts with customers are recognized at the point when control of oil and natural gas is transferred to the customers in accordance with Accounting Standard Codification Topic 606, Revenue from Contracts with Customers The Fund also has an estimation process for revenue and related accruals, and any identified difference between its revenue estimates and actual revenue has not been significant. During each of the three and nine months ended September 30, 2021 and 2020, revenue recognized from performance obligations satisfied in previous periods was not significant.
Allowance for Credit LossesAllowance for Credit Losses The Fund is exposed to credit losses through the sale of oil and natural gas to customers. However, the Fund only sells to a small number of major oil and gas companies that have investment-grade credit ratings. Based on historical collection experience, current and future economic and market conditions and a review of the current status of customers' production receivables, the Fund has not recorded an expected loss allowance as there are no past due receivable balances or projected credit losses. The Fund considered the current and expected future economic and market conditions surrounding the Coronavirus (“COVID-19”) pandemic and determined based on the composition of its customer base, there was no related credit loss impact.
Impairment of Long-Lived AssetsImpairment of Long-Lived Assets The Fund reviews the carrying value of its oil and gas properties for impairment whenever events and circumstances indicate that the recorded carrying value of its oil and gas properties may not be recoverable. Recoverability is evaluated by comparing estimated future net undiscounted cash flows to the carrying value of the oil and gas properties at the time of the review. If the carrying value exceeds the estimated future net undiscounted cash flows, the carrying value of the oil and gas properties is impaired and written down to fair value. Fair value is determined using valuation techniques that include both market and income approaches and use Level 3 inputs. The fair value determinations require considerable judgment and are sensitive to change. Different pricing assumptions, estimates of oil and natural gas reserves and future development costs or discount rates could result in a significant impact on the amount of impairment. There were no impairments of oil and gas properties during each of the three and nine months ended September 30, 2021 and 2020. Fluctuations in oil and natural gas commodity prices may impact the fair value of the Fund’s oil and gas properties. In addition, significant declines in oil and natural gas commodity prices could reduce the quantities of reserves that are commercially recoverable, which could result in impairment.
Recent Accounting PronouncementsRecent Accounting Pronouncements The Fund has considered recent accounting pronouncements issued during the nine months ended September 30, 2021 or through the filing of this report, and the Fund has not identified new standards that it believes will have an impact on the Fund’s financial statements.

Organization and Summary of S_3

Organization and Summary of Significant Accounting Policies (Tables)9 Months Ended
Sep. 30, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Schedule of Asset Retirement ObligationsNine months ended September 30,
2021
2020
(in thousands)
Balance, beginning of period
$
1,206
$
1,275
Liabilities settled
(13
)
(65
)
Accretion expense
11
12
Revision of estimates
(305
)
-
Balance, end of period
$
899
$
1,222

Organization and Summary of S_4

Organization and Summary of Significant Accounting Policies (Narrative) (Details) $ in Millions9 Months Ended
Sep. 30, 2021USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Depletion expense $ 0.3

Organization and Summary of S_5

Organization and Summary of Significant Accounting Policies (Schedule of Asset Retirement Obligations) (Details) - USD ($) $ in Thousands9 Months Ended
Sep. 30, 2021Sep. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Balance, beginning of period $ 1,206 $ 1,275
Liabilities settled(13)(65)
Accretion expense11 12
Revision of estimates(305)
Balance, end of period $ 899 $ 1,222

Related Parties (Details)

Related Parties (Details) - USD ($) $ in Thousands3 Months Ended9 Months Ended
Sep. 30, 2021Jun. 30, 2021Mar. 31, 2021Sep. 30, 2020Mar. 31, 2020Sep. 30, 2021Sep. 30, 2020Dec. 31, 2011
Annual management fee percentage rate1.00%1.00%2.50%
Annual management fees paid to Fund Manager $ 59 $ 59 $ 176 $ 176
Percentage of total distributions allocated to Fund Manager15.00%15.00%
Distributions $ 831 $ 871 $ 679 243 $ 776
Manager [Member]
Annual management fees paid to Fund Manager100 100 $ 200 200
Distributions $ 125 $ 130 $ 102 $ 37 $ 116 $ 400 $ 200

Commitments and Contingencies (

Commitments and Contingencies (Details) $ in Millions9 Months Ended
Sep. 30, 2021USD ($)
Commitments and Contingencies Disclosure [Abstract]
Commitments for the drilling and development of investment properties $ 3.5
Commitments for asset retirement obligations included in estimated capital commitments1.5
Commitments for the drilling and development of investment properties expected to be incurred in the next 12 months $ 0.2