RIDGEWOOD ENERGY A-1 FUND LLC Annual Report - Your Investment Snapshot

Considering an investment in RIDGEWOOD ENERGY A-1 FUND LLC? This summary cuts through the jargon to give you a clear picture of its past year, core business, and what it means for your investment. We will cover its performance, financial health, key risks, and future direction in plain language.

Business Overview: What RIDGEWOOD ENERGY A-1 FUND LLC Does

RIDGEWOOD ENERGY A-1 FUND LLC, established in 2009 as a Delaware LLC, acquires "working interests" in oil and natural gas properties. This means it owns a share of an oil or gas field. The Fund gains the right to participate in drilling and production, receives a portion of the revenue, and bears a share of the costs. The Fund concentrates its operations in the offshore U.S. Gulf of Mexico, specifically near Texas, Louisiana, and Alabama.

The Fund initially raised $41.1 million from investors through a private offering. After fees, $34.5 million was allocated directly to investments and operating costs. Ridgewood Energy Corporation, founded in 1982, manages the Fund, overseeing investor relations and investment management.

A Major Strategic Shift: This past year marks a significant turning point: the Fund officially announced its capital is fully invested. This means the Fund no longer seeks new projects or acquisitions. Instead, it now focuses entirely on managing and maximizing returns from its existing oil and natural gas properties. For investors, this implies future growth will come solely from optimizing current assets rather than expanding the portfolio.

The Beta Project forms the cornerstone of the Fund's operations, accounting for a large portion of its revenue and cash flow. As of December 31, 2025, the Fund holds interests in 5 gross wells (meaning 5 wells exist in total) and 0.08 net wells (reflecting its fractional ownership across these wells). These wells produce both oil and natural gas offshore in the Gulf of Mexico. Importantly, other companies operate these wells, meaning the Fund relies on third-party operators for day-to-day management and production.

The shift to a fully invested status indicates a transition from an acquisition-oriented growth strategy to a focus on asset management and cash distribution from existing operations.

Financial Performance: A Look at the Numbers

We can infer trends from the fees and distributions paid to the Manager:

• Manager Fees: Ridgewood Energy Corporation receives an annual management fee of 2.5% of the total capital investors contributed (adjusted for certain costs). The Fund pays this fee monthly, a steady $0.3 million for both 2025 and 2024, regardless of its profitability or cash flow. This represents a fixed cost for the Fund.
• Manager Distributions: The Manager also receives 15% of the cash distributions from the Fund's operations. This figure serves as a key indicator of the Fund's distributable cash flow:
  • In 2025, the Manager received $0.1 million in distributions.
  • In 2024, it received $0.2 million in distributions. This 50% decline in distributions to the Manager strongly suggests a significant reduction in the overall cash available for distribution from the Fund's oil and gas operations in 2025 compared to 2024. Lower commodity prices, reduced production, or increased operating costs could explain this decline.

The Fund also covers all its other operational expenses, including insurance, regulatory reports, taxes, legal, and accounting fees.

Management's Discussion and Analysis: Key Highlights

This section discusses the Fund's operational results, liquidity, and capital resources, highlighting significant events and trends.

Major Wins:

• Deepwater Royalty Relief: The Beta Project, the Fund's key asset, benefits significantly from its eligibility for "Deepwater Royalty Relief." This program can substantially reduce the royalties the Fund would normally pay to the U.S. Government for deepwater oil and gas production. This relief applies as long as oil prices remain below certain thresholds (estimated between $48.48 and $62.95 per barrel) and natural gas prices stay below their thresholds (between $6.06 and $10.49 per mmbtu). This provides a valuable buffer, enhancing the Fund's net revenue during periods of moderate commodity prices.

Major Challenges:

• Declining Distributable Cash Flow: The most notable challenge is the observed drop in cash distributions to the Manager, from $0.2 million in 2024 to $0.1 million in 2025. This indicates a tougher year for the Fund's operational cash flow, directly impacting potential investor distributions. The underlying causes (e.g., lower production, commodity prices, or higher costs) are critical.
• No New Growth Avenues: With its capital fully invested, the Fund has effectively capped its potential for asset growth through new acquisitions. Future returns depend entirely on the performance of its existing, finite assets, limiting opportunities for portfolio expansion or diversification.
• Heavy Reliance on Third-Party Operators: The Fund does not operate its own wells; it relies entirely on third-party companies. This introduces a significant dependency risk, as the Fund's performance ties to the operational efficiency, financial stability, and strategic decisions of these external operators.

Leadership and Strategy Changes:

The Fund's most profound change is its strategic pivot to a "fully invested" status, meaning it will no longer pursue new acquisitions. This fundamental shift redefines the Fund's purpose from growth-oriented investment to asset management and cash distribution. Consequently, the Investment Committee, composed of five experts from Ridgewood Energy Corporation, has also shifted its focus. Its activities now primarily dedicate to optimizing the development and operation of the Fund's existing properties, rather than evaluating new opportunities.

Financial Health, Cash, Debt, and Liquidity

We can highlight key aspects of its financial structure:

• Long-Term Royalty Obligation: As of January 1, 2023, the Fund has a fixed 10.81% "overriding royalty interest" (ORRI) on the Beta Project's oil and natural gas production. This means a portion of the revenue from its main project goes directly to a former lender, representing a long-term financial commitment that reduces the Fund's net revenue.
• Limited Investor Liquidity: For investors, a critical aspect of the Fund's financial health is the extreme lack of liquidity for its "Shares of LLC Membership Interest." No public market exists for these shares, making them very difficult to sell quickly or at a predictable price. Strict rules govern the transfer or resale of these shares. As of February 26, 2026, 207.7026 shares were outstanding. This illiquidity means investors should prepare for a long-term commitment with limited options for early exit.

Key Risks to Your Investment

Since no public stock price exists, we will focus on risks that could impact the value and return of your investment:

• Concentration Risk (Beta Project): The Beta Project generates a substantial portion of the Fund's income. Any significant issues with this single asset – such as unexpected production declines, operational failures, infrastructure problems, severe weather events (like hurricanes in the Gulf), or inaccurate estimated oil and gas reserves – could severely impact the Fund's cash flow and, consequently, your investment.
• Commodity Price Volatility: The Fund's production value ties directly to the highly volatile market prices of crude oil and natural gas. Global supply and demand, economic conditions, geopolitical events, and even speculative trading influence these prices, leading to unpredictable revenue streams.
• Operational and Third-Party Risks: Despite not operating its own wells, the Fund faces risks inherent in oil and gas operations, including equipment failures, accidents, environmental incidents (e.g., spills), and rising costs for drilling, maintenance, or decommissioning. Crucially, reliance on third-party operators makes the Fund's performance vulnerable to their operational efficiency, financial stability, and adherence to best practices.
• Reserve Depletion Risk: As the Fund no longer acquires new assets, its existing oil and gas reserves are finite and will naturally deplete over time. Without new discoveries or acquisitions, the Fund's production and revenue will eventually decline, impacting long-term distributions and the ultimate return of capital.
• Geopolitical and Global Events: Major global disruptions, such as widespread health crises (pandemics), international conflicts (like the Russia-Ukraine war), or acts of terrorism, can significantly disrupt global markets, impact energy demand, and affect commodity prices, thereby influencing the Fund's financial performance.
• Regulatory and Environmental Risks: The oil and gas industry, particularly offshore, faces heavy regulation. Changes in government policies, environmental regulations (e.g., stricter emissions standards, new drilling restrictions), or increased taxes could raise operating costs, limit operations, or even lead to significant liabilities for environmental damage.
• No Growth Strategy: The strategic decision to cease new investments eliminates the Fund's ability to grow its asset base, diversify its portfolio, or generate new revenue streams. This limits upside potential and makes the Fund more susceptible to the performance of its existing, aging assets.

Competitive Position

The Fund operates in a specialized niche: holding working interests in offshore U.S. Gulf of Mexico oil and natural gas properties. Unlike many energy companies, it acts more as a financial investor than an active operator, relying on third parties to manage physical operations. Its competitive advantage, if any, would stem from the Manager's (Ridgewood Energy Corporation's) expertise in identifying and structuring these specific types of working interests and negotiating favorable terms. However, without direct operational control, the Fund's competitive edge largely ties to its Manager's historical deal-making and asset selection rather than operational efficiency.

Future Outlook

With all capital fully deployed and no new projects planned, the Fund's future outlook depends entirely on the performance and cash flow generation of its current oil and natural gas properties, particularly the Beta Project. The primary objective will be to maximize returns from these existing assets to generate cash flow for investor distributions.

To achieve this, the Fund must:

• Navigate the inherent volatility of oil and natural gas markets.
• Effectively manage operational challenges through its third-party operators.
• Adapt to evolving regulatory environments and potential changes in royalty relief terms.
• Manage the natural decline of its finite reserves.

For investors, this implies a focus on consistent, albeit potentially declining, distributions rather than capital appreciation from asset growth. The long-term strategy for returning capital to investors, given the shares' illiquid nature, will be a key consideration.

Market Trends and Regulatory Changes Affecting the Fund

Several external factors significantly influence the Fund's operations and financial performance:

• Offshore Regulations: Specific federal laws, such as the Outer Continental Shelf Lands Act (OCSLA), govern the Fund's operations, and agencies like the Bureau of Ocean Energy Management (BOEM) oversee them. Any changes in these regulations could impact operational costs, permitting processes, or environmental compliance requirements.
• Deepwater Royalty Relief Conditions: While currently a benefit, the Deepwater Royalty Relief program is conditional. If oil and natural gas prices rise above the specified thresholds (e.g., oil above $62.95 per barrel or gas above $10.49 per mmbtu), this relief would cease, increasing the Fund's royalty payments and reducing its net revenue during periods of high commodity prices.
• Global Oil and Natural Gas Market: Broader market trends in supply, demand, and pricing for oil and natural gas are paramount. Global economic health, evolving energy policies (including the push for renewable energy), and geopolitical stability all play a critical role in determining the Fund's revenues.
• Energy Transition and ESG Factors: The global shift towards renewable energy sources and an increasing focus on Environmental, Social, and Governance (ESG) factors present a long-term challenge for funds solely invested in fossil fuels. This trend could impact future demand for oil and gas, access to capital, and the overall valuation of such assets, especially for a fund no longer acquiring new, potentially more efficient, assets.
• Climate Change Impacts: Beyond regulatory changes, the physical risks associated with climate change, such as an increased frequency or intensity of hurricanes in the Gulf of Mexico, pose direct threats to offshore infrastructure. This could lead to production disruptions, increased repair costs, and higher insurance premiums.