UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended |
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _______________________to____________________________ |
Commission File No. 000-52576
Ridgewood Energy S Fund, LLC
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) | 20-4077773 (I.R.S. Employer Identification No.) |
14 Philips Parkway, Montvale, NJ07645
(Address of principal executive offices) (Zip code)
(800)942-5550
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”,filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | x | Smaller reporting company | x |
Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Securities Exchange Act of 1934. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934)Act). Yes ☐ ¨No ☒
As of November 9, 2017May 3, 2024, there were shares of LLC Membership Interest outstanding.
Table of Contents
PAGE | |||
PART I - FINANCIAL INFORMATION | |||
Item 1. | 1 | ||
1 | |||
2 | |||
3 | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
PART II - OTHER INFORMATION | |||
Item 1. | |||
Item 1A. | |||
Item 2. | |||
Item 3. | |||
Item 4. | |||
Item 5. | |||
Item 6. | |||
PART I – FINANCIAL INFORMATION
RIDGEWOOD ENERGY S FUND, LLC
(in thousands, except share data)
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 3,280 | $ | 4,714 | ||||
Salvage fund | 373 | 981 | ||||||
Production receivable | 375 | 584 | ||||||
Other current assets | 90 | 110 | ||||||
Total current assets | 4,118 | 6,389 | ||||||
Salvage fund | 1,082 | 1,080 | ||||||
Oil and gas properties: | ||||||||
Proved properties | 52,082 | 49,699 | ||||||
Less: accumulated depletion and amortization | (35,375 | ) | (32,066 | ) | ||||
Total oil and gas properties, net | 16,707 | 17,633 | ||||||
Total assets | $ | 21,907 | $ | 25,102 | ||||
Liabilities and Members' Capital | ||||||||
Current liabilities: | ||||||||
Due to operators | $ | 923 | $ | 831 | ||||
Accrued expenses | 333 | 1,128 | ||||||
Current portion of long-term borrowings | 2,778 | 1,248 | ||||||
Asset retirement obligations | 373 | 981 | ||||||
Total current liabilities | 4,407 | 4,188 | ||||||
Long-term borrowings | 8,600 | 9,988 | ||||||
Asset retirement obligations | 496 | 480 | ||||||
Other liabilities | 50 | 50 | ||||||
Total liabilities | 13,553 | 14,706 | ||||||
Commitments and contingencies (Note 4) | ||||||||
Members' capital: | ||||||||
Manager: | ||||||||
Distributions | (6,478 | ) | (6,478 | ) | ||||
Retained earnings | 5,522 | 5,236 | ||||||
Manager's total | (956 | ) | (1,242 | ) | ||||
Shareholders: | ||||||||
Capital contributions (1,000 shares authorized; | ||||||||
839.5395 issued and outstanding) | 124,401 | 124,401 | ||||||
Syndication costs | (14,236 | ) | (14,236 | ) | ||||
Distributions | (38,806 | ) | (38,806 | ) | ||||
Accumulated deficit | (62,049 | ) | (59,721 | ) | ||||
Shareholders' total | 9,310 | 11,638 | ||||||
Total members' capital | 8,354 | 10,396 | ||||||
Total liabilities and members' capital | $ | 21,907 | $ | 25,102 |
March 31, 2024 | December 31, 2023 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 925 | $ | 860 | ||||
Salvage fund | - | 225 | ||||||
Production receivable | 144 | 222 | ||||||
Due from affiliate (Note 2) | 8 | 8 | ||||||
Other current assets | 16 | 31 | ||||||
Total current assets | 1,093 | 1,346 | ||||||
Salvage fund | 1,615 | 1,371 | ||||||
Oil and gas properties: | ||||||||
Proved properties | 19,622 | 19,623 | ||||||
Less: accumulated depletion and amortization | (17,420 | ) | (17,197 | ) | ||||
Total oil and gas properties, net | 2,202 | 2,426 | ||||||
Total assets | $ | 4,910 | $ | 5,143 | ||||
Liabilities and Members' Capital | ||||||||
Current liabilities: | ||||||||
Due to operators | $ | 43 | $ | 47 | ||||
Accrued expenses | 64 | 51 | ||||||
Asset retirement obligations | - | 225 | ||||||
Total current liabilities | 107 | 323 | ||||||
Asset retirement obligations | 899 | 659 | ||||||
Total liabilities | 1,006 | 982 | ||||||
Commitments and contingencies (Note 3) | ||||||||
Members' capital: | ||||||||
Manager: | ||||||||
Distributions | (7,859 | ) | (7,791 | ) | ||||
Retained earnings | 8,223 | 8,164 | ||||||
Manager's total | 364 | 373 | ||||||
Shareholders: | ||||||||
Capital contributions ( issued and outstanding) | shares authorized;124,401 | 124,401 | ||||||
Syndication costs | (14,236 | ) | (14,236 | ) | ||||
Distributions | (46,634 | ) | (46,247 | ) | ||||
Accumulated deficit | (59,991 | ) | (60,130 | ) | ||||
Shareholders' total | 3,540 | 3,788 | ||||||
Total members' capital | 3,904 | 4,161 | ||||||
Total liabilities and members' capital | $ | 4,910 | $ | 5,143 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
1 |
RIDGEWOOD ENERGY S FUND, LLC
(in thousands, except per share data)
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue | ||||||||||||||||
Oil and gas revenue | $ | 1,268 | $ | 300 | $ | 3,972 | $ | 566 | ||||||||
Expenses | ||||||||||||||||
Depletion and amortization | 498 | 166 | 3,309 | 173 | ||||||||||||
Management fees to affiliate (Note 2) | 193 | 131 | 587 | 571 | ||||||||||||
Operating expenses | 382 | 264 | 1,092 | 561 | ||||||||||||
General and administrative expenses | 42 | 38 | 132 | 110 | ||||||||||||
Total expenses | 1,115 | 599 | 5,120 | 1,415 | ||||||||||||
Income (loss) from operations | 153 | (299 | ) | (1,148 | ) | (849 | ) | |||||||||
Interest expense, net | (300 | ) | (183 | ) | (894 | ) | (181 | ) | ||||||||
Net loss | $ | (147 | ) | $ | (482 | ) | $ | (2,042 | ) | $ | (1,030 | ) | ||||
Manager Interest | ||||||||||||||||
Net income (loss) | $ | 91 | $ | (23 | ) | $ | 286 | $ | (105 | ) | ||||||
Shareholder Interest | ||||||||||||||||
Net loss | $ | (238 | ) | $ | (459 | ) | $ | (2,328 | ) | $ | (925 | ) | ||||
Net loss per share | $ | (284 | ) | $ | (547 | ) | $ | (2,773 | ) | $ | (1,102 | ) |
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Revenue | ||||||||
Oil and gas revenue | $ | 526 | $ | 853 | ||||
Other revenue | 20 | 65 | ||||||
Total revenue | 546 | 918 | ||||||
Expenses | ||||||||
Depletion and amortization | 223 | 537 | ||||||
Operating expenses | 89 | 114 | ||||||
General and administrative expenses | 61 | 63 | ||||||
Total expenses | 373 | 714 | ||||||
Income from operations | 173 | 204 | ||||||
Interest income | 25 | 9 | ||||||
Net income | $ | 198 | $ | 213 | ||||
Manager Interest | ||||||||
Net income | $ | 59 | $ | 107 | ||||
Shareholder Interest | ||||||||
Net income | $ | 139 | $ | 106 | ||||
Net income per share | $ | 165 | $ | 126 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
2 |
RIDGEWOOD ENERGY S FUND, LLC
IN MEMBERS’ CAPITAL
(in thousands)
Nine months ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities | ||||||||
Net loss | $ | (2,042 | ) | $ | (1,030 | ) | ||
Adjustments to reconcile net loss to net cash | ||||||||
provided by (used in) operating activities: | ||||||||
Depletion and amortization | 3,309 | 173 | ||||||
Accretion expense | 13 | - | ||||||
Amortization of debt discounts and deferred financing costs | 142 | 47 | ||||||
Changes in assets and liabilities: | ||||||||
Decrease (increase) in production receivable | 209 | (103 | ) | |||||
Decrease (increase) in other current assets | 20 | (90 | ) | |||||
Increase (decrease) in due to operators | 27 | (342 | ) | |||||
(Decrease) increase in accrued expenses | (48 | ) | 164 | |||||
Settlements of asset retirement obligations | (608 | ) | - | |||||
Net cash provided by (used in) operating activities | 1,022 | (1,181 | ) | |||||
Cash flows from investing activities | ||||||||
Capital expenditures for oil and gas properties | (3,062 | ) | (1,896 | ) | ||||
Decrease (increase) in salvage fund | 606 | (2 | ) | |||||
Net cash used in investing activities | (2,456 | ) | (1,898 | ) | ||||
Cash flows from financing activities | ||||||||
Long-term borrowings | - | 850 | ||||||
Net cash provided by financing activities | - | 850 | ||||||
Net decrease in cash and cash equivalents | (1,434 | ) | (2,229 | ) | ||||
Cash and cash equivalents, beginning of period | 4,714 | 2,822 | ||||||
Cash and cash equivalents, end of period | $ | 3,280 | $ | 593 | ||||
Supplemental disclosure of cash flow information | ||||||||
Cash paid for interest, net of amounts capitalized | $ | 806 | $ | - | ||||
Supplemental disclosure of non-cash investing activities | ||||||||
Due to operators for accrued capital expenditures for oil and gas properties | $ | 584 | $ | 317 |
Three months ended March 31, 2024 | ||||||||||||||||
# of Shares | Manager | Shareholders | Total | |||||||||||||
Balances, December 31, 2023 | - | 839.5395 | $ | 373 | $ | 3,788 | $ | 4,161 | ||||||||
Distributions | - | - | (68 | ) | (387 | ) | (455 | ) | ||||||||
Net income | - | - | 59 | 139 | 198 | |||||||||||
Balances, March 31, 2024 | - | 839.5395 | $ | 364 | $ | 3,540 | $ | 3,904 |
Three months ended March 31, 2023 | ||||||||||||||||
# of Shares | Manager | Shareholders | Total | |||||||||||||
Balances, December 31, 2022 | - | 839.5395 | $ | 371 | $ | 5,423 | $ | 5,794 | ||||||||
Distributions | - | - | (113 | ) | (644 | ) | (757 | ) | ||||||||
Net income | - | - | 107 | 106 | 213 | |||||||||||
Balances, March 31, 2023 | - | 839.5395 | $ | 365 | $ | 4,885 | $ | 5,250 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
3 |
RIDGEWOOD ENERGY S FUND, LLC
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 198 | $ | 213 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depletion and amortization | 223 | 537 | ||||||
Accretion expense | 15 | 11 | ||||||
Changes in assets and liabilities: | ||||||||
Decrease in production receivable | 78 | 107 | ||||||
Decrease in due from affiliate | - | 1 | ||||||
Decrease in other current assets | 15 | 13 | ||||||
Decrease in due to operators | (4 | ) | (24 | ) | ||||
Increase (decrease) in accrued expenses | 13 | (3 | ) | |||||
Net cash provided by operating activities | 538 | 855 | ||||||
Cash flows from investing activities | ||||||||
Credits (capital expenditures) for oil and gas properties | 1 | (9 | ) | |||||
Increase in salvage fund | (19 | ) | (46 | ) | ||||
Net cash used in investing activities | (18 | ) | (55 | ) | ||||
Cash flows from financing activities | ||||||||
Distributions | (455 | ) | (757 | ) | ||||
Net cash used in financing activities | (455 | ) | (757 | ) | ||||
Net increase in cash and cash equivalents | 65 | 43 | ||||||
Cash and cash equivalents, beginning of period | 860 | 742 | ||||||
Cash and cash equivalents, end of period | $ | 925 | $ | 785 |
The accompanying notes are an integral part of these unaudited condensed financial statements.
4 |
RIDGEWOOD ENERGY S FUND, LLC
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
1. | Organization and Summary of Significant Accounting Policies |
Organization
The Ridgewood Energy S Fund, LLC (the “Fund”), a Delaware limited liability company, was formed on December 19, 2005 and operates pursuant to a limited liability company agreement (the “LLC Agreement”) dated as of February 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 Fundthe 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 Fundthe 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 3 and 4.
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, financial position,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, 20162023 financial statements and notes thereto included in the Fund’s Annual Report on Form 10-K (“20162023 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, 2016,2023, 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, the Managermanagement 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 20162023 Annual Report. There have been no significant changes to the Fund’s significant accounting policies during the three and nine months ended September 30, 2017.March 31, 2024.
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, production receivable, due from affiliate, other current assets, salvage fund, due to operators and accrued expenses. The carrying amounts of these financial assets and liabilities approximate fair value due to their short-term nature. The Fund also applies the provisions of the fair value measurement accounting guidance to its non-financial assets and liabilities, such as oil and gas properties and asset retirement obligations, on a non-recurring basis.
5 |
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.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. At least bi-annually,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 following table presents changes in asset retirement obligations during the nine months ended September 30, 2017 and 2016.
2017 | 2016 | |||||||
(in thousands) | ||||||||
Balance, beginning of period | $ | 1,461 | $ | 1,782 | ||||
Liabilities incurred | 3 | - | ||||||
Liabilities settled | (608 | ) | - | |||||
Accretion expense | 13 | - | ||||||
Balance, end of period | $ | 869 | $ | 1,782 |
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. Revenues from the sale of natural gas liquid are included within gas revenues. The Fund’s oil and natural gas generally are sold to its customers at prevailing market prices based on an index in which the prices are published, adjusted for pricing differentials, quality of oil and pipeline allowances. Under the Fund’s oil and natural gas contracts, each unit of oil and natural gas represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and the transaction price related to the remaining performance obligations is the variable index-based price attributable to each unit of oil and natural gas that is transferred to the customer. The Fund invoices customers once its performance obligations have been satisfied, at which point the payment is unconditional. Accordingly, the Fund’s oil and natural gas contracts do not give rise to contract assets or liabilities. The receivables related to the Fund’s oil and gas revenue are included within “Production receivable” on the Fund’s balance sheets.
Other revenue is generated from the Fund’s production handling, gathering and operating services agreement with affiliated entities and other third parties. The Fund earns a fee for its services and recognizes these fees as revenue at the time its performance obligations are satisfied as the control of oil and natural gas is never transferred to the Fund, thus there are no unsatisfied performance obligations. The Fund’s project operator performs joint interest billing once the performance obligations have been satisfied, at which point the payment is unconditional. Accordingly, the Fund’s production handling, gathering and operating services agreement with affiliated entities and other third parties does not give rise to contract assets or liabilities. The receivables related to the Fund’s proportionate share of revenue from affiliates are included within “Due from affiliate” on the Fund’s balance sheets. The receivables related to the Fund’s proportionate share of revenue from third parties are presented as a reduction from “Due to operator” on the Fund’s balance sheets. The receivables are settled by issuance of a non-cash credit from the Beta Project operator to the Fund when the operator performs the joint interest billing of the lease operating expenses due from the Fund. However, if applying the joint interest billing credit results in a net credit balance due to the Fund, the Beta Project operator remits such balance in cash to the Fund.
The Fund also has an estimation process for revenue and related accruals, and any identified difference between its revenue estimates and actual revenue historically have not been significant. During the three months ended March 31, 2024 and 2023, 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.
Impairment of Long-Lived Assets
The Fund reviews the carrying value of its oil and gas properties annually and when management determines thatfor impairment whenever events and circumstances indicate that the recorded carrying value of its oil and gas properties may not be recoverable. Impairments are determinedRecoverability 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 assetoil and gas properties is impaired, and written down to fair value. Fair value which is determined using estimated future net discounted cash flows from the asset.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, reserve estimates of oil and gas reserves and future development costs or discount rates could result in a different calculatedsignificant impact on the amount of impairment. Given the volatility
6 |
There were no impairments of oil and natural gas prices, it is reasonably possible thatproperties during the Fund’s estimate of future net discounted cash flows from proved oilthree months ended March 31, 2024 and natural gas reserves could change in the near term.
Recent Accounting Pronouncements
The Fund has substantially completedconsidered recent accounting pronouncements issued during the evaluationthree months ended March 31, 2024 and through the filing of this report, and the accounting guidance and currently expects the adoption of the accounting guidanceFund has not identified new standards that it believes will not have a materialan impact on the Fund’s financial statements. Under the new accounting guidance, the revenue associated with the Fund’s existing contracts will be recognized in the period that control of the related commodity is transferred to the customer, which is generally consistent with its current revenue recognition model. The Fund will adopt the new accounting guidance using the modified retrospective method at the date of adoption, which is January 1, 2018. Although the Fund has not identified changes to its revenue recognition that would result in a material cumulative effect adjustment to retained earnings on January 1, 2018, the Fund expects the adoption of the accounting guidance will result in enhanced disclosures related to revenue recognition policies, the Fund’s performance obligations and significant judgments used in applying the new revenue recognition accounting guidance.
2. | 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 and related well costs incurred by the Fund. In addition, pursuant toFund and fully depleted project investments. During 2020, the termsManager waived its management fee for the remaining life of the LLC Agreement,Fund. Upon the Manager is also permitted to waivewaiver of the management fee, at its own discretion.the Fund began recording costs, totaling $20 thousand per quarter, representing reimbursements to the Manager, related to services provided by the Manager for accounting and investor relations. Such fee may be temporarily waived to accommodatecosts are included on the Fund’s short-term capital commitments.statements of operations within general and administrative expenses. Management feesreimbursement costs during each of the three and nine months ended September 30, 2017March 31, 2024 and 2023 were $0.2 million and $0.6 million, respectively. Management fees during the three and nine months ended September 30, 2016 were $0.1 million and $0.6 million, respectively.
The Manager is also entitled to receive a 15% interest in of the cash distributions from operations made by the Fund. Distributions paid to the Manager during each of the three months ended March 31, 2024 and 2023 were $0.1 million.
The Fund did not pay distributions during the three and nine months ended September 30, 2017 and 2016.
The Fund has provided discussionis a party to a production handling, gathering and operating services agreement (“PHA”) with affiliated entities and other third-party working interest owners in the Claiborne Project. Under the terms of this agreementthe PHA, the Claiborne Project producers have agreed to pay the Beta Project owners a fixed production handling fee for each barrel of oil and mcf of natural gas processed through the Beta Project production facility. During the three months ended March 31, 2024 and 2023, the Fund earned $9 thousand and $28 thousand, respectively, representing its proportionate share of the production handling fees earned from affiliates, which are included within “Other revenue” on the Fund’s statements of operations. As of March 31, 2024 and December 31, 2023, the Fund’s receivables of $8 thousand, respectively, related to the Fund’s proportionate share of revenue from affiliates are included within “Due from affiliate” on the Fund’s balance sheets. The receivables are settled by issuance of a non-cash credit from the Beta Project operator to the Fund on behalf of the Claiborne Project working interest owners when the operator performs the joint interest billing of the lease operating expenses due from the Fund. However, if applying the joint interest billing credit results in Note 2 of “Notesa net credit balance due to Financial Statements” – “Related Parties” containedthe Fund, the Beta Project operator remits such balance in Item 8. “Financial Statements and Supplementary Data” within its 2016 Annual Report.
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 projects to acquire and develop oil and natural gas projects, which are also owned by other entities that are likewise managed by the Manager.
3. |
Commitments and Contingencies |
Capital Commitments
As of September 30, 2017,March 31, 2024, the Fund’s estimated capital commitments related to its oil and gas properties were $3.7 $2.7 million (which include asset retirement obligations for the Fund’s projects of $1.8 $1.5 million), noneof which $1.9 million is expected to be spent during the next twelve months primarily related to the additional development costs for the Beta Project. As a result of continued development of the Beta Project, the Fund has experienced negative cash flows for the nine months ended September 30, 2017. Additionally, current liabilities exceed current assets as of September 30, 2017.months. Future results of operations and cash flows are dependent on the continued successful developmentrevenues from production and the related productionsale of oil and natural gas revenues from the Beta Project.
7 |
Impact from operationsMarket Conditions
The oil market demonstrated stability in early January 2024 despite the ongoing and evolving geopolitical situation in the Middle East, which might otherwise cause upward pressure on oil prices. Although oil prices have increased during the first quarter of 2024, the outlook for the oil and gas market continues to be volatile. The physical crude market is not sufficientcurrently tight, and it is expected to meetremain so for the Fund’s commitments, the Manager will temporarily waive all or a portionremainder of the year. Oil prices continue to be supported by the active supply-side management fee as well as provide short-term financingof OPEC Plus and are constantly adjusting to accommodatereflect changes in both the Fund’s short-term commitments if needed.
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, 2017March 31, 2024 and December 31, 2016,2023, 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.
BSEE and BOEM Notice to Lessees on Supplemental Bonding
On July 14, 2016,October 16, 2020, the Bureau of Ocean Energy Management (“BOEM”) and the Bureau of Safety and Environmental Enforcement (“BSEE”) published a proposed new rule entitled “Risk Management, Financial Assurance and Loss Prevention” to update BOEM’s financial assurance criteria and other BSEE-administered regulations. Upon review of the 2020 joint proposed rule and analysis of public comments, the Secretary of the U.S. Department of the Interior (“Interior”) elected to separate the BOEM and BSEE portions of the supplemental bonding requirements. BSEE finalized some provisions from the 2020 proposal as discussed below. BOEM rescinded its portion of the 2020 proposed rule and issued its new rule below.
On April 18, 2023, BSEE published a Noticefinal rule at 88 FR 23569 on Risk Management, Financial Assurance and Loss Prevention effective May 18, 2023 to Lesseesclarify and formalize its regulations related to decommissioning responsibilities of Outer Continental Shelf (“NTL”OCS”) that discontinuedoil, gas, and materially replaced existingsulfur lessees and grant holders to ensure compliance with lease, grant, and regulatory obligations. The rule implements provisions of the proposed rule intended to clarify decommissioning responsibilities of right-of-use and easement grant holders and to formalize BSEE's policies regarding performance by predecessors ordered to decommission OCS facilities. The final rule withdraws the proposal set forth in the 2020 proposed rule to amend BSEE's regulations to require BSEE to proceed in reverse chronological order against predecessor lessees, owners of operating rights, and procedures regarding financial security (i.e. supplemental bonding) forgrant holders when requiring such entities to perform their accrued decommissioning obligations if the current lessees, owners, or holders have failed to perform. In addition, BSEE also decided not to finalize the proposed appeal bonding requirements in this final rule.
8 |
On April 15, 2024, BOEM published a final rule (30 CFR parts 550, 556, and 590) on Risk Management and Financial Assurance for OCS Lease and Grant Obligations effective 60 days after publication in the Federal Register that substantially revises the supplemental financial assurance requirements to decommission offshore wells and infrastructure once they are no longer in use. The rule establishes a simplified test using only two criteria by which BOEM would determine whether supplemental financial assurance should be required of lessees of federalOCS oil and gas leaseslessees: (1) credit rating, and owners(2) the ratio of pipeline rights-of-way, rights-of usethe value of proved oil and easements ongas reserves of the Outer Continental Shelf (“Lessees”). Generally,lease to the estimated decommissioning liability associated with the reserves. If a current lessee meets one of these criteria, it will not be required to provide supplemental financial assurance. In addition, as it relates to supplemental financial assurance requirements for OCS oil and gas right-of-use and easement grant holders, BOEM will only consider the first criteria – i.e., credit rating. Under the rule, BOEM would no longer consider or rely upon the financial strength of prior grant holders and lessees in determining whether, or how much, supplemental financial assurance should be provided by the current grant holders and lessees. The rule would allow existing lessees and grant holders to request phased-in payments over three years to meet the new NTL (i) endedfinancial assurance amounts. The Fund is evaluating 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 new 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 June 22, 2017, the BOEM announced that the implementation timeline extension will remain in effect pending the completion of its reviewimpact of the new NTL. The Fund, as well as other industry participants, are working with the BOEM,rule on its operatorsoperations and working interest partners to determine and agree upon the correct level of decommissioning obligations to which they may be liablefinancial condition and the manner in which such obligations will be secured. The impact of the NTL, if enforced without change or amendment, may require the Fund to fully secure all of its potential abandonment liabilities to the BOEM’s satisfaction using one or more of the enumerated methods for doing so. Potentially this could increase costs to the Fund if the Fund is required to obtain additional supplemental bonding, fund escrow accounts or obtain letters of credit.
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 fundsentities managed by the Manager. Depending on the extent, nature and payment of claims made by the Fund or other fundsentities managed by the Manager, yearly insurance coverage may be exhausted and become insufficient to cover a claim by the Fund in a given year.
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this Quarterly Report on Form 10-Q (“Quarterly Report”) and the documents Ridgewood Energy S Fund, LLC (the “Fund”) has incorporated by reference into this Quarterly Report, other than purely historical information, including estimates, projections, statements relating to the Fund’s business plans, strategies, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 that1995. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. You are therefore cautioned against relying on any such forward-looking statements. Forward-looking statements can generally be identified by words such as “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “plan,” “target,” “pursue,” “may,” “will,” “will likely result,” and similar expressions and references to future periods. Examples of events that could cause actual results to differ materially from historical results or those anticipated include the impact on the Fund’s business and operations of any future widespread health emergencies or public health crises such as pandemics and epidemics, weather conditions, such as hurricanes, changes in market and other conditions affecting the pricing, production and demand of oil and natural gas, the cost and availability of equipment, the military conflicts between Russia and Ukraine and Israel and Hamas and the global response to such conflicts, acts of terrorism and changes in domestic and foreign governmental regulations. Examples of forward-looking statements made herein include statements regarding projects, investments, insurance, capital expenditures and liquidity. Forward-looking statements made in this document speak only as of the date on which they are made. The Fund undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Critical Accounting Policies and Estimates
There were no changes to the Fund’s critical accounting policies and estimates from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2016.
Overview of the Fund’s Business
The Fund was organized primarily to acquire interests in oil and natural gas properties located in the United States offshore waters of Texas, Louisiana and Alabama in the Gulf of Mexico. The Fund’s primary investment objective is to generate cash flow for distribution to its shareholders by generating returns across a portfolio of oil and natural gas projects. Distributions to shareholders are made in accordance with the Fund’s limited liability company agreement (the “LLC Agreement”).
Ridgewood Energy Corporation (the “Manager”) is the Manager, and as such, 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. As compensation for its services,During 2020, the Manager is entitled to an annualwaived its management fee payable monthly, equal to 2.5%for the remaining life of the total capital contributions madeFund. Upon the waiver of the management fee, the Fund began recording costs related to services provided by the Fund’s shareholders, net of cumulative dry-holeManager for accounting and related well costs incurred by the Fund.investor relations. The Fund does not currently, nor is there any plan to, operate any project in which the Fund participates. The Manager enters into operating agreements with third-party operators for the management of all exploration, development and producing operations, as appropriate. The Manager also participates in distributions.
Market Conditions
The oil market demonstrated stability in early January 2024 despite the ongoing and evolving geopolitical situation in the Middle East, which might otherwise cause upward pressure on oil prices. Although oil prices have increased during the first quarter of 2024, the outlook for the oil and gas market continues to be volatile. The physical crude market is currently tight, and it is expected to remain so for the remainder of the year. Oil prices continue to be supported by the active supply-side management of OPEC Plus and are constantly adjusting to reflect changes in both the current status and future expectations of the supply/demand balance, which is impacted by various market pressures. In addition, ongoing geopolitical conditions, including the ongoing Russia-Ukraine war, the evolving Israel-Hamas conflict, and acts of terrorism, will continue to influence oil and natural gas commodity prices. The impact of these issues on global financial and commodity markets and their corresponding effect on the Fund remains uncertain.
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Commodity Price Changes
Changes in oil and natural gas commodity prices may significantly affect liquidity and expected operating results. DeclinesSignificant declines in oil and natural gas commodity prices not only reduce revenues and profits but could also reduce the quantities of reserves that are commercially recoverable. Significant declines in prices couldrecoverable and result in non-cash charges to earnings due to impairment.
The overall trend for the oil prices havehas been subject to significant fluctuationsfavorable during the past several years. Thefirst quarter of 2024, which positively impacted the cash flow generated by the Beta Project. In addition, the Fund anticipates price cyclicality in its planning and believes it is well positionedwell-positioned to withstand price volatility. Despite operating in a sustained lower commodity price environment, the Fund continued to advance the development of the Beta Project, which commenced production during the second half of 2016. The Fund has suspended distributionswill continue to closely manage and continues to conservecoordinate its capital spending estimates within its expected cash flows to provide for the continued development ofcosts associated with the well recompletions for the Beta Project.
Market pricing for oil and natural gas is volatile and is likely to continue to be volatile in the future. This volatility is caused by numerous factors and market conditions that the Fund cannot control or influence. Therefore, it is impossible to predict the future price of oil and natural gas with any certainty. Factors affecting market pricing for oil and natural gas include:
· | worldwide economic, political and social conditions impacting the global supply and demand for oil and natural gas, which may be driven by various risks, including war (such as the invasion of Ukraine by Russia and the evolving Israel-Hamas conflict), terrorism, political unrest, or health epidemics; |
· | weather conditions; |
· | economic conditions, including the impact of continued inflation and associated changes in monetary policy and demand for petroleum-based products; |
· | actions by OPEC Plus, the Organization of the Petroleum Exporting |
· | political instability in the Middle East and other major oil and gas producing regions; |
· | governmental regulations (inclusive of impacts of climate change), both domestic and foreign; |
· | domestic and foreign tax policy; |
· | the pace adopted by foreign governments for the exploration, development, and production of their national reserves; |
· | the supply and price of foreign oil and gas; |
· | the cost of exploring for, producing and delivering oil and gas; |
· | the discovery rate of new oil and gas reserves; |
· | the rate of decline of existing and new oil and gas reserves; |
· | available pipeline and other oil and gas transportation capacity; |
· | the ability of oil and gas companies to raise capital; |
· | the overall supply and demand for oil and gas; and |
· | the price and availability of alternate fuel sources. |
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Business Update
Information regarding the Fund’s current projects, all ofBeta Project, which areis located in the United States offshore waters ofin the Gulf of Mexico, is provided in the following table.
Total Spent | Total | ||||||||||||
Working | through | Fund | |||||||||||
Project | Interest | September 30, 2017 | Budget | Status | |||||||||
(in thousands) | |||||||||||||
Producing Properties | |||||||||||||
Beta Project | 2.5 | % | $ | 21,087 | $ | 24,062 | The Beta Project is expected to include the development of five wells. Wells #1 and #2 commenced production during third quarter 2016 and fourth quarter 2016, respectively. Wells #3 and #4 commenced production during second quarter 2017 and third quarter 2017, respectively. Well #5 began drilling in third quarter 2017 and is expected to commence production in first quarter 2018. The Fund expects to spend $1.9 million for additional development costs and $1.1 million for asset retirement obligations. | ||||||
Main Pass 275 | 30.0 | % | $ | 5,768 | $ | 5,976 | Main Pass 275, a single-well project, commenced production in 2007. The well is producing at nominal rates. A recompletion is planned for 2018 at an estimated cost of $0.1 million. The Fund expects to spend $0.1 million for asset retirement obligations. | ||||||
West Cameron 75 | 20.0 | % | $ | 25,112 | $ | 25,266 | West Cameron 75, a single-well project, commenced production in 2007. The well is producing at nominal rates and nearing the end of its productive life. The Fund expects to spend $0.2 million for asset retirement obligations. |
Total Spent | Total | |||||||||||
Working | through | Fund | ||||||||||
Project | Interest | March 31, 2024 | Budget | Status | ||||||||
(in thousands) | ||||||||||||
Beta Project | 1.8% | $ | 17,981 | $ | 20,437 | The Beta Project, a seven-well project, commenced production from its first two wells in 2016. Additional five wells commenced production in 2017, 2018 and 2019. The Fund expects to spend $1.2 million for additional development costs and $1.3 million for asset retirement obligations. |
Results of Operations
The following table summarizes the Fund’s results of operations during the three and nine months ended September 30, 2017March 31, 2024 and 2016,2023, and should be read in conjunction with the Fund’s financial statements and notes thereto included within Item 1. “Financial Statements” in Part I of this Quarterly Report.
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Revenue | ||||||||||||||||
Oil and gas revenue | $ | 1,268 | $ | 300 | $ | 3,972 | $ | 566 | ||||||||
Expenses | ||||||||||||||||
Depletion and amortization | 498 | 166 | 3,309 | 173 | ||||||||||||
Management fees to affiliate | 193 | 131 | 587 | 571 | ||||||||||||
Operating expenses | 382 | 264 | 1,092 | 561 | ||||||||||||
General and administrative expenses | 42 | 38 | 132 | 110 | ||||||||||||
Total expenses | 1,115 | 599 | 5,120 | 1,415 | ||||||||||||
Income (loss) from operations | 153 | (299 | ) | (1,148 | ) | (849 | ) | |||||||||
Interest expense, net | (300 | ) | (183 | ) | (894 | ) | (181 | ) | ||||||||
Net loss | $ | (147 | ) | $ | (482 | ) | $ | (2,042 | ) | $ | (1,030 | ) |
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
(in thousands) | ||||||||
Revenue | ||||||||
Oil and gas revenue | $ | 526 | $ | 853 | ||||
Other revenue | 20 | 65 | ||||||
Total revenue | 546 | 918 | ||||||
Expenses | ||||||||
Depletion and amortization | 223 | 537 | ||||||
Operating expenses | 89 | 114 | ||||||
General and administrative expenses | 61 | 63 | ||||||
Total expenses | 373 | 714 | ||||||
Income from operations | 173 | 204 | ||||||
Interest income | 25 | 9 | ||||||
Net income | $ | 198 | $ | 213 |
Overview
. The following table provides information related to the Fund’s oil and natural gas production and oil and gas revenue during the threeThree months ended March 31, | ||||||||
2024 | 2023 | |||||||
Number of wells producing | 7 | 7 | ||||||
Total number of production days | 560 | 609 | ||||||
Oil sales (in thousands of barrels) | 7 | 11 | ||||||
Average oil price per barrel | $ | 75 | $ | 71 | ||||
Gas sales (in thousands of mcfs) | 8 | 16 | ||||||
Average gas price per mcf | $ | 3.83 | $ | 3.77 |
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Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Number of wells producing | 6 | 3 | 6 | 3 | ||||||||||||
Total number of production days | 430 | 194 | 1,197 | 552 | ||||||||||||
Oil sales (in thousands of barrels) | 22 | 4 | 69 | 6 | ||||||||||||
Average oil price per barrel | $ | 43 | $ | 39 | $ | 43 | $ | 38 | ||||||||
Gas sales (in thousands of mcfs) | 84 | 62 | 324 | 197 | ||||||||||||
Average gas price per mcf | $ | 3.00 | $ | 2.47 | $ | 2.96 | $ | 1.93 |
The increasesdecrease in production days noted in the table above table werewas primarily relatedattributable to the commencement ofscheduled maintenance shut-in at a third-party gas processing facility during March 2024 through which natural gas production of four wells infrom the Beta Project two wells duringflows. That facility is now back online, and the second half of 2016 and two wells during 2017.Beta Project is ramping production back to its normal flow rate. The decreases in sales volumes noted in the table above were primarily attributable to natural declines in production from the Beta Project’s wells. See additional discussion in the “Business Update” section above.
Oil and Gas Revenue
.See “Overview” above for factors that impact the oil and gas revenue volume and rate variances.
Other Revenue. Other revenue is generated from the Fund’s production handling, gathering and operating services agreement with affiliated entities and other third parties.
Depletion and Amortization
. Depletion and amortization during the three months endedSee “Overview” above for certain factors that impact the depletion and amortization volume and rate variances. Depletion and amortization rates may also be impacted by changes in reserve estimates provided annually by the Fund’s independent petroleum engineers.
Operating Expenses
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
(in thousands) | ||||||||||||||||
Lease operating expense | $ | 299 | $ | 180 | $ | 871 | $ | 426 | ||||||||
Insurance expense | 57 | 64 | 138 | 87 | ||||||||||||
Transportation and processing expense | 16 | - | 35 | - | ||||||||||||
Workover expense | - | 15 | 20 | 49 | ||||||||||||
Accretion expense and other | 10 | 5 | 28 | (1 | ) | |||||||||||
$ | 382 | $ | 264 | $ | 1,092 | $ | 561 |
Three months ended March 31, | ||||||||
2024 | 2023 | |||||||
(in thousands) | ||||||||
Lease operating expense | $ | 42 | $ | 37 | ||||
Transportation and processing expense | 22 | 40 | ||||||
Accretion expense | 15 | 11 | ||||||
Insurance expense | 10 | 14 | ||||||
Workover expense | - | 12 | ||||||
$ | 89 | $ | 114 |
Lease operating expense and transportation and processing expense relatesrelate to the Fund’s producing projects. Accretion expense relates to the asset retirement obligations established for the Fund’s oil and gas properties. Insurance expense represents premiums related to the Fund’s properties,projects, which vary depending upon the number of wells producing or drilling. Workover expense represents costs to restore or stimulate production of existing reserves. Accretion expense relates to the asset retirement obligations established for the Fund’s proved properties.
Production costs, which includesinclude lease operating expense, insurance and transportation and processing expense was $10.20and insurance expense, were $0.1 million ($9.37 per barrel of oil equivalent (“BOE”or “BOE”) and $8.51during the three months ended March 31, 2024 compared to $0.1 million ($6.55 per BOE) during the three months ended March 31, 2023.
Production costs were relatively consistent during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in production costs per BOE during the three and nine months ended September 30, 2017, respectively,March 31, 2024 compared to $17.06 per BOE and $13.40 per BOE during the three and nine months ended September 30, 2016, respectively. The decreases wereMarch 31, 2023 was primarily attributable to the Beta Project, which commenced production in third quarter 2016. The Beta Project has lower cost per BOE as compared to other projects due to the processing of production through its standalone facility. Thehad higher production costs per BOE may decline over time as throughput increases fromduring the project or other projects expectedthree months ended March 31, 2024 primarily attributable to tie-indecreased production volumes coupled with the impact of an adjustment to the facility.
See “Overview” above for factors that impact oil and natural gas production.
General and Administrative Expenses.
General and administrative expenses represent costs specifically identifiable or allocable to the Fund, such as accounting and professional fees and insurance expenses. Management reimbursement costs related to services provided by the Manager for accounting and investor relations are also included within general and administrative expenses.13 |
Interest Expense, Net
Capital Resources and Liquidity
Operating Cash Flows
Cash flows provided by operating activities during the ninethree months ended September 30, 2017March 31, 2024 were $1.0$0.5 million, primarily related to revenue received of $4.2$0.6 million, partially offset by operating expenses of $1.8$0.1 million.
Cash flows provided by operating activities during the three months ended March 31, 2023 were $0.9 million, management feesprimarily related to revenue received of $0.6$1.0 million, the settlementspartially offset by operating expenses of asset retirement obligations of $0.6$0.1 million and general and administrative expenses of $0.1 million.
Investing Cash Flows
Cash flows used in investing activities during the ninethree months ended September 30, 2017March 31, 2024 were $2.5 million,$18 thousand, primarily related to capital expenditures for oil and gas properties of $3.1 million, partially offset by proceeds from theinvestments in salvage fund of $0.6 million.
Cash flows used in investing activities during the ninethree months ended September 30, 2016March 31, 2023 were $1.9$0.1 million, primarily related to capital expenditures for oil and gas properties.
Financing Cash Flows
Cash flows fromused in financing activities during the ninethree months ended September 30, 2017.
Cash flows provided byused in financing activities during the ninethree months ended September 30, 2016March 31, 2023 were $0.9$0.8 million, related to proceeds from long-term borrowings.
Capital Expenditures
Capital expenditures for oil and gas properties have been funded with the capital raised by the Fund in its private placement offering and in certain circumstances, through debt financing. The Fund’s remaining capital has been fully allocated to complete its projects. Asinvested and as a result, the Fund will not invest in any new projects and will limit its investment activities, if any, to those projects in which it currently has a working interest.
See “Business Update” under this Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report for information regarding the Fund’s current projects. See “Liquidity Needs” below for additional information.
Liquidity Needs
The Fund’s primary short-term and long-term liquidity needs are to fund its operations and capital expenditures for its oil and gas properties and borrowing repayments.properties. Such needs are funded utilizing operating income and existing cash on-hand.
As of September 30, 2017,March 31, 2024, the Fund’s estimated capital commitments related to its oil and gas properties were $3.7$2.7 million (which include asset retirement obligations for the Fund’s projects of $1.8$1.5 million), none of which $1.9 million is expected to be spent during the next twelve months primarily related to the additional development costs for the Beta Project. As a result of continued development of the Beta Project, the Fund has experienced negative cash flows for the nine months ended September 30, 2017. Additionally, current liabilities exceed current assets as of September 30, 2017.months. Future results of operations and cash flows are dependent on the continued successful developmentrevenues from production and the related productionsale of oil and gas revenues from the Beta Project. In addition, cash flow from operations may be impacted by fluctuations in oil and natural gas commodity prices. Based upon its current cash position, salvage fund and its current reservereserves estimates, the Fund expects cash flow from operations to be sufficient to cover its commitments borrowing repayments, as well asand ongoing operations. ReserveReserves 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 will temporarily waive all or a portion of the management fee as well as provide short-term financing to accommodate the Fund’s short-term commitments if needed.
Distributions, if any, are funded from available cash from operations, as defined in the LLC Agreement, and the frequency and amount are within the Manager’s discretion. Due to the significantHowever, distributions may be impacted by amounts of future capital required to developfor the costs associated with the well recompletions for the Beta Project, distributions have been impacted, and may be impacted inas budgeted, as well as the future, by amounts reserved to provide for its ongoing development costs, debt service costs, and funding itsof estimated asset retirement obligations. Distributions may also be impacted by fluctuations in oil and natural gas commodity prices.
14 |
Contractual Obligations
The Fund enters into participation and joint operating agreements with operators. On behalf of the Fund, an operator enters into various contractual commitments pertaining to exploration, development and production activities. The Fund does not negotiate such contracts. No contractual obligations exist as of September 30, 2017March 31, 2024 and December 31, 2016,2023, other than those discussed in “Estimated Capital“Capital Expenditures” and “Liquidity Needs – Credit Agreement” above.
Recent Accounting Pronouncements
See Note 1 of “Notes to Unaudited Condensed Financial Statements” - “Organization and Summary of Significant Accounting Policies” contained in Item 1. “Financial Statements” within Part I of this Quarterly Report for a discussion of recent accounting pronouncements.
Not required.
In accordance with Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Fund’s management, including its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Fund’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Fund’s disclosure controls and procedures were effective as of September 30, 2017.
There has been no change in the Fund’s internal control over financial reporting that occurred during the three months ended September 30, 2017March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the Fund’s internal control over financial reporting.
15 |
PART II – OTHER INFORMATION
None.
Not required.
None.
None.
None.
None.
16 |
ITEM 6. | EXHIBITS |
EXHIBIT | TITLE OF EXHIBIT | METHOD OF FILING | ||
31.1 | Filed herewith | |||
32 | Filed herewith | |||
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | Filed herewith | |||
Inline XBRL | Filed herewith | |||
Inline XBRL Taxonomy Extension | Filed herewith | |||
Inline XBRL Taxonomy Extension | Filed herewith | |||
Inline XBRL Taxonomy Extension | Filed herewith | |||
Inline XBRL Taxonomy Extension | Filed herewith | |||
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed herewith |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
RIDGEWOOD ENERGY S FUND, LLC | ||||||
Dated: | By: | /s/ | KATHLEEN P. MCSHERRY | |||
Name: | Kathleen P. McSherry | |||||
Title: | Chief Executive Officer and Executive Vice President, Chief Financial Officer and Assistant Secretary | |||||
(Principal Executive Officer and Principal Financial and Accounting Officer) |
17