| Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies Organization The Ridgewood Energy Y Fund, LLC (the Fund), a Delaware limited liability company, was formed on March 25, 2008 and operates pursuant to a limited liability company agreement (the LLC Agreement) dated as of May 1, 2008 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. With respect to project investments, the Manager locates potential projects, conducts due diligence, and negotiates and completes the transactions in which the investments are made. The Manager performs, or arranges for the performance of, the management, advisory and administrative services required for Fund operations. Such services include, without limitation, the administration of shareholder accounts, shareholder relations and the preparation, review and dissemination of tax and other financial information. In addition, the Manager provides office space, equipment and facilities and other services necessary for Fund operations. The Manager also engages and manages the contractual relations with unaffiliated custodians, depositories, accountants, attorneys, broker-dealers, corporate fiduciaries, insurers, banks and others as required. See Notes 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 and cash flows for the periods presented. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted in these unaudited interim condensed financial statements. The results of operations, financial position, and cash flows for the periods presented herein are not necessarily indicative of future financial results. These unaudited interim condensed financial statements should be read in conjunction with the Fund's December 31, 2014 financial statements and notes thereto included in the Fund's Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC). The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP.
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 Manager reviews its estimates, including those related to the fair value of financial instruments, property balances, determination of proved reserves, impairments and asset retirement obligations. Actual results may differ from those estimates.
Fair Value Measurements The fair value measurement guidance provides a hierarchy that prioritizes and defines the types of inputs used to measure fair value. The fair value hierarchy gives the highest priority to Level 1 inputs, which consists of unadjusted quoted prices for identical instruments in active markets. Level 2 inputs consist of quoted prices for similar instruments. Level 3 valuations are derived from inputs that are significant and unobservable; hence, these valuations have the lowest priority. Cash and cash equivalents approximate fair value based on Level 1 inputs.
Cash and Cash Equivalents All highly liquid investments with maturities, when purchased, of three months or less, are considered cash and cash equivalents. At times, deposits may be in excess of federally insured limits, which are $ 250
Salvage Fund The Fund deposits in a separate interest-bearing account, or salvage fund, money to provide for the dismantling and removal of production platforms and facilities and plugging and abandoning its wells at the end of their useful lives in accordance with applicable federal and state laws and regulations. Interest earned on the account will become part of the salvage fund. There are no restrictions on withdrawals from the salvage fund.
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 LLOG Exploration Company. The Fund accounts for its investment in Delta House using the cost method of accounting for investments as it does not have the ability to exercise significant influence over such investment. Under the cost method, the Fund recognizes an investment in the equity of an investee at cost. The Fund recognizes as income dividends received that are distributed from net accumulated earnings of the investee since the date of acquisition by the Fund. Dividends received in excess of earnings subsequent to the date of investment are considered a return of investment and are recorded as reductions of cost of the investment. The fair value of this investment is not estimated because there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. The Fund is exempt from estimating interim fair values as the Fund does not meet the definition of a publicly traded company. The aggregate prior year balance of the Fund's investment in Delta House was classified as Equipment and facilities in progress within Oil and gas properties in the Fund's December 31, 2014 balance sheet. Such amount has been corrected to reclassify these investments to Investment in Delta House to conform to the current year presentation. The reclassification had no impact on the Fund's prior period statements of operations or cash flows.
Oil and Gas Properties The Fund invests in oil and gas properties, which are operated by unaffiliated entities that are responsible for drilling, administering and producing activities pursuant to the terms of the applicable operating agreements with working interest owners. The Fund's portion of exploration, drilling, operating and capital equipment expenditures is billed by operators. Exploration, development and acquisition costs are accounted for using the successful efforts method. Costs of acquiring unproved and proved oil and natural gas leasehold acreage, including lease bonuses, brokers' fees and other related costs are capitalized. Costs of drilling and equipping productive wells and related production facilities are capitalized. Exploratory costs are capitalized pending determination of whether proved reserves have been found. If proved commercial reserves are not found, exploratory costs are expensed as dry-hole costs. At times, the Fund receives adjustments to certain wells from their respective operators upon review and audit of the wells' costs. Annual lease rentals and exploration expenses are expensed as incurred. All costs related to production activity and workover efforts are expensed as incurred. Insurance expense related to operating wells has been reclassified from General and administrative expense in prior year to Operating expense to correct prior period presentation. Once a well has been determined to be fully depleted or upon the sale, retirement or abandonment of a property, the cost and related accumulated depletion and amortization, if any, is eliminated from the property accounts, and the resultant gain or loss is recognized. At June 30, 2015 and December 31, 2014, amounts recorded in due to operators totaling $ 0.8
Advances to Operators for Working Interests and Expenditures The Fund may be required to advance its share of the estimated succeeding month's expenditures to the operator for its oil and gas properties. The Fund accounts for such payments as advances to operators for working interests and expenditures. As the costs are incurred, the advances are reclassified to proved properties.
Asset Retirement Obligations For oil and gas properties, there are obligations to perform removal and remediation activities when the properties are retired. When a project reaches drilling depth and is determined to be either proved or dry, an asset retirement obligation is incurred. Plug and abandonment costs associated with unsuccessful projects are expensed as dry-hole costs. The following table presents changes in asset retirement obligations for the six months ended June 30, 2015 and the year ended December 31, 2014.
2015
2014
(in thousands)
Balance, beginning of period $ 2,154 $ 2,087
Liabilities incurred 37 19
Accretion expense 170 48
Revisions in estimated cash flows 1,228 -
Balance, end of period $ 3,589 $ 2,154 Asset retirement obligations are expected to be funded with proceeds from the salvage fund or through amounts withheld from operating income and held in escrow by such projects' operators.
Syndication Costs Syndication costs are direct costs incurred by the Fund in connection with the offering of the Fund's shares, including professional fees, selling expenses and administrative costs payable to the Manager, an affiliate of the Manager and unaffiliated broker-dealers, which are reflected on the Fund's balance sheet as a reduction of shareholders' capital.
Revenue Recognition and Imbalances Oil and gas revenues are recognized when oil and gas is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable.
Impairment of Long-Lived Assets The Fund reviews the value of its oil and gas properties and related investments whenever management determines that events and circumstances indicate that the recorded carrying value of such assets may not be recoverable. Impairments are determined by comparing future net undiscounted cash flows to the net book value at the time of the review. If the net book value exceeds the future net undiscounted cash flows, the carrying value of the asset is written down to fair value, which is determined using net discounted future cash flows from the asset. The Fund provides for impairments on unproved properties when it determines that the property will not be developed or a permanent impairment in value has occurred. The fair value determinations require considerable judgment and are sensitive to change. Different pricing assumptions, reserve estimates or discount rates could result in a different calculated impairment. Given the volatility of oil and natural gas prices, it is reasonably possible that the Fund's estimate of discounted future net cash flows from proved oil and natural gas reserves could change in the near term. If oil and natural gas prices decline significantly, even if only for a short period of time, it is possible that write-downs of oil and gas properties could occur.
Depletion and Amortization Depletion and amortization of the cost of proved oil and gas properties are calculated using the units-of-production method. Proved developed reserves are used as the base for depleting capitalized costs associated with successful exploratory well costs, development costs and related facilities. The sum of proved developed and proved undeveloped reserves is used as the base for depleting or amortizing leasehold acquisition costs. During the three and six months ended June 30, 2015, the Fund recorded $ 1.0
Income Taxes No provision is made for income taxes in the financial statements. The Fund is a limited liability company, and as such, the Fund's income or loss is passed through and included in the tax returns of the Fund's shareholders.
Income and Expense Allocation Profits and losses are allocated to shareholders and the Manager in accordance with the LLC Agreement.
Distributions Distributions to shareholders are allocated in proportion to the number of shares held. The Manager determines whether available cash from operations, as defined in the LLC Agreement, will be distributed. Such distributions are allocated 85 15 Available cash from dispositions, as defined in the LLC Agreement, will be paid 99 1 85 15
Recent Accounting Pronouncements The Fund has considered recent accounting pronouncements and believes that these recent pronouncements will not have a material effect on the Fund's financial statements. |
