1338474--3/30/2007--RIDGEWOOD_ENERGY_Q_FUND

related topics

{interest, director, officer}

{tax, income, asset}

{loss, insurance, financial}

{gas, price, oil}

{investment, property, distribution}

{competitive, industry, competition}

{cost, regulation, environmental}

{operation, natural, condition}

{control, financial, internal}

{acquisition, growth, future}

{cost, contract, operation}

RISKS INHERENT IN THE FUND S BUSINESS The Fund s exploration and production activities are subject to risks that it cannot control and it may have insufficient insurance to cover these risks. To the extent the fund is not covered by insurance, it could incur losses and liabilities that could reduce revenues, increase costs or eliminate dollars available for future exploration and development projects. The Fund s investment activities may result in unsuccessful projects. The Fund has already experienced dry-holes and further dry-holes will adversely impact the Fund s profitability and returns. The actual costs to drill a well, or dry-hole costs, can materially exceed estimates due to cost overruns. In such event, the risks associated with the well increase. The Fund s reserve estimates are inherently uncertain and may be inaccurate and if so, may adversely affect the Fund s revenue and profitability. The prices that the Fund may receive for its oil or natural gas are highly volatile and unpredictable and may not be sufficient to generate enough cash flow to make distributions to investors. The Fund may be required to take writedowns if natural gas and oil prices decline. The unavailability and cost of needed equipment may adversely affect the fund s profitability and operations. The Fund has a limited amount of capital available to invest and therefore has limited ability to invest in many more projects. Further, each unsuccessful project erodes the Fund s limited capital. The Fund may incur costs to comply with the many environmental and other governmental regulations that apply to its operations, which may adversely impact its ability to generate cash flow for distributions. The Fund relies on third parties to operate, manage, and maintain its projects over which it has limited control. Therefore, decisions may be made by these third parties that adversely affect the Fund or its operations. The Fund owns projects jointly with other companies over whom it has no control and who may influence the manner in which the project is operated. The Fund faces competition from larger entities with greater capital resources that could limit the number and availability of economically attractive projects. The Fund maintains a salvage fund that may be insufficient to cover such salvage costs, in which event, the Fund could be liable for any excess. The Fund s projects and operations are located exclusively in the Gulf of Mexico and are subject to interruptions and damage from hurricanes that could adversely affect the fund s cash flow due to such exclusivity. The Fund s internal control over financial reporting could be adversely affected by material weaknesses in the Fund s internal controls. RISKS RELATED TO THE NATURE OF THE FUND S SHARES The Fund s shares have severe restrictions on transferability and liquidity and shareholders are required to hold the shares indefinitely. Shareholders are not permitted to participate in the Fund s management or operations and must rely exclusively on the Manager. The Fund s assets are illiquid and, therefore, cash flow for distributions, if any, must come from operations and not dispositions of assets. The Fund indemnifies its officers, as well as the Manager and its employees, for certain actions taken on its behalf and therefore, Fund assets may be used to reimburse such officers. The Manager receives a management fee regardless of the Fund s profitability and also receives cash distributions. Under Delaware law, shareholders have limited access to information and therefore, the Fund and Manager can restrict certain information, including shareholder information, making communications with other shareholders difficult. As a result, the information you receive about the Fund and its activities will be limited to what the Manager chooses to provide. Cash distributions are not guaranteed and may be less than anticipated or estimated. Because the Manager manages may other oil and natural gas funds, it may have conflicts of interest in its management of the Fund s operations. TAX RISKS ASSOCIATED WITH AN INVESTMENT IN SHARES If the IRS audits the Fund, it could require investors to amend or adjust their tax returns or result in an audit of their tax.

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1338474--3/30/2007--RIDGEWOOD_ENERGY_Q_FUND_LLC