RIDGEWOOD ENERGY V FUND LLC

RIDGEWOOD ENERGY V FUND LLC Annual Report: An Investor's Overview

For investors in RIDGEWOOD ENERGY V FUND LLC (referred to as "the Fund"), the annual report for the year ending December 31, 2025, paints a challenging picture. This summary highlights the key insights, revealing significant operational hurdles and a substantial erosion of initial investment value.

Business Overview

The Fund, a Delaware-based LLC established in 2006, acquires "working interests" in oil and natural gas properties. This means the Fund owns a share of the production and bears a portion of the costs, but does not operate the properties directly. The Fund concentrates its investments in the offshore waters of Texas, Louisiana, and Alabama in the Gulf of Mexico.

Crucially, the Fund has fully invested its initial capital of $63.9 million (after fees). This marks a strategic shift: it will no longer pursue new acquisitions, focusing instead on managing and optimizing its existing portfolio.

As of December 31, 2025, the Fund owned working interests in 5 productive oil and natural gas wells, all located in the Gulf of Mexico. Third-party operators manage these wells. These assets include approximately 447 net developed acres and a small amount of undeveloped acreage.

The year 2025 faced operational challenges, particularly concerning the Fund's primary asset, the Beta Project.

Competitive Position

As a fund acquiring non-operated working interests, RIDGEWOOD ENERGY V FUND LLC's competitive position differs from an operating company's. The Fund does not directly compete in the exploration, development, or production of oil and natural gas. Instead, its competitive standing primarily stems from:

• Niche Focus: Specialization in acquiring working interests in specific offshore Gulf of Mexico properties, a strategy now concluded as the Fund is fully invested.
• Reliance on Operators: Performance and value realization depend entirely on the operational efficiency, technical expertise, and financial stability of the third-party operators of its properties. The Fund's influence on operational decisions is limited to its working interest share.
• Capital Allocation (Historical): Historically, its competitive advantage in asset acquisition stemmed from its access to capital and its manager's expertise in identifying suitable non-operated interests. With no new acquisitions planned, this advantage is no longer relevant.
• Cost Structure: Its non-operating status avoids direct operational management overhead but exposes it to costs and risks passed through by operators.

In essence, the Fund's competitive position is less about market share or direct operational superiority and more about the effectiveness of its asset management strategy and the performance of its operating partners within its specialized investment mandate.

Financial Performance

Here are key financial trends for the Fund:

• Declining Cash Flow: Ridgewood Energy Corporation, the Fund's manager, receives 15% of cash distributions from operations. In 2025, the manager received $0.1 million, a significant 67% decrease from $0.3 million in 2024. This implies total cash distributions from operations to all interest holders plummeted from approximately $2.0 million in 2024 to $0.67 million in 2025, signaling a substantial reduction in operational cash flow.

• Underlying Asset Value (A Major Concern): An independent engineering firm (NSAI) conducted a reserves report as of December 31, 2025. This report provides a critical valuation of the Fund's proved oil and gas reserves, all located in the Beta Field.

  • Total Proved Reserves:
    • Oil: 77.1 thousand barrels (MBBL)
    • Natural Gas Liquids (NGL): 8.8 thousand barrels (MBBL)
    • Natural Gas: 44.1 million cubic feet (MMCF)
  • Estimated Financial Value:
    • Total Future Net Revenue (expected revenue less future costs): $786.0 thousand ($0.786 million)
    • Total Present Worth (PV-10, a standard industry metric representing estimated future net cash flows, discounted at 10% per year): $1,051.8 thousand ($1.05 million)

  This valuation stands in stark contrast to the Fund's initial $63.9 million investment. The estimated present worth of all its proved reserves now stands at only about 1.6% of the capital initially deployed, suggesting a massive erosion of investor value.

  A further breakdown reveals a critical imbalance:

  • Proved Developed Producing (PDP) Reserves: These reserves come from currently producing wells. They project a negative future net revenue of -$759.7 thousand and a negative present worth of -$155.8 thousand. This means the Fund's currently producing wells are expected to lose money over their remaining lifespan, even after accounting for operating expenses and eventual abandonment costs.
  • Proved Undeveloped (PUD) Reserves: These are known reserves requiring future drilling and development. They project a positive future net revenue of $1,545.7 thousand and a positive present worth of $1,207.7 thousand.

  Therefore, the Fund's entire positive estimated value derives solely from these undeveloped reserves, which require significant future capital investment and successful execution to realize. The existing producing assets project as a financial drain.

Management Discussion and Analysis

This section provides management's perspective on the Fund's financial condition and results of operations for the year ended December 31, 2025.

Results of Operations: The Fund's operational cash flow declined significantly in 2025. Cash distributions from operations to all interest holders decreased substantially from approximately $2.0 million in 2024 to $0.67 million in 2025. Operational challenges, particularly concerning the Beta Project—the Fund's primary asset—primarily drove this reduction. Pressure build-up forced the shut-in of two key wells (#4 and #3) during the third quarter of 2025, directly impacting production volumes and revenue generation. The independent reserves report further highlights this challenge, projecting that the Fund's currently producing wells (Proved Developed Producing reserves) will generate negative future net revenue and present worth. This indicates they anticipate unprofitability over their remaining lifespan after accounting for operating and abandonment costs.

Liquidity and Capital Resources: The Fund has fully invested its initial capital of $63.9 million. As of December 31, 2025, the estimated present worth (PV-10) of its proved reserves stood at $1.05 million, representing a substantial erosion of the initial investment. The Fund faces significant upcoming capital outlays and obligations. These include an anticipated $1.2 million for recompletion operations on Well #4 (which began in January 2026), followed by subsequent recompletions on Wells #5 and #2. Additionally, the Fund has estimated $1.8 million in Asset Retirement Obligations (ARO)—costs for future decommissioning and cleanup. Funding these expenditures and generating future distributions to interest holders critically depends on existing cash reserves and the successful, profitable development of its Proved Undeveloped (PUD) reserves. These PUD reserves currently represent the entirety of the Fund's positive estimated value. The Fund has shifted its strategy to managing and optimizing its existing portfolio, with no plans for new acquisitions. It now focuses on maximizing returns from its mature assets.

Critical Accounting Estimates: An independent engineering firm's valuation of the Fund's oil and gas reserves is a critical estimate. This valuation relies on various assumptions, including future commodity prices (the report uses constant prices), production rates, operating costs, and capital expenditures. While these estimates adhere to industry standards, actual results may differ materially due to changes in underlying assumptions, operational performance, and market conditions. The report specifically notes that it does not escalate operating and capital costs for inflation, which could lead to more favorable projections than actual outcomes.

Operational Highlights and Challenges

Key Challenges in 2025:

• Operational Downtime: Pressure build-up forced the shut-in of two wells (#4 and #3) in the critical Beta Project during the third quarter of 2025, directly impacting production and cash flow.
• Projected Losses from Current Production: The independent reserves report confirms that the Fund's currently producing wells project as unprofitable over their remaining life.
• Significant Future Capital Outlays:
  • Recompletion Costs: The Fund anticipates spending an additional $1.2 million for recompletion operations (major repairs/upgrades) on Well #4 (which began in January 2026), followed by Wells #5 and #2.
  • Asset Retirement Obligations (ARO): The Fund has an estimated $1.8 million in future costs for decommissioning and cleaning up wells—a substantial liability relative to its current asset valuation.
• Royalty Burden: The Beta Project is subject to an 11.81% "overriding royalty interest" (ORRI) payable to a former lender. This reduces the Fund's share of revenue.

Key Benefits:

• Deepwater Royalty Relief Act of 1995: The Beta Project benefits from this act, which exempts it from certain royalties to the U.S. Government. This significantly boosts the Fund's bottom line. However, this relief can be lost if oil prices exceed roughly $48-$63 per barrel or natural gas prices surpass $6-$10 per MMBtu (annual adjustments apply to these thresholds).

Financial Health and Liquidity

The Fund's financial health raises major concerns. With an initial capital of $63.9 million and a current asset valuation of only $1.05 million, a substantial portion of the original investment appears lost.

While the Beta Project spent approximately $19.674 million out of a total budget of $22.715 million, leaving some remaining budget for that specific project, the upcoming recompletion costs ($1.2 million) and asset retirement obligations ($1.8 million) pose significant cash outflows. Given the projected negative cash flow from producing wells, the Fund's ability to meet these obligations and generate future distributions heavily depends on its existing cash reserves and the successful, profitable development of its undeveloped reserves.

Key Risks for Investors

Investors face several significant risks:

1. Massive Capital Erosion: The most critical risk is the apparent destruction of most of the Fund's initial $63.9 million investment, with the current estimated value of all proved reserves standing at only $1.05 million.
2. Negative Cash Flow from Producing Assets: The Fund's currently producing wells project as unprofitable, acting as a financial drain rather than an income source.
3. High Reliance on Undeveloped Reserves: The Fund's entire positive valuation hinges on successfully and profitably developing its PUD reserves. This requires significant future capital investment, carries execution risks, and offers no guarantee of successful development or profitability.
4. Illiquidity: No public market exists for the Fund's "Shares of LLC Membership Interest," and one is unlikely to develop. This makes buying or selling interests extremely difficult for investors, severely limiting liquidity.
5. Concentration Risk: All of the Fund's proved reserves concentrate in a single asset, the Beta Project. Any operational issues or adverse events affecting this project will disproportionately impact the Fund's overall value and performance.
6. Operational Risks: The Fund relies on third-party operators, lacking direct control over day-to-day operations. Operational issues, such as recent well shut-ins, can directly impact production and cash flow.
7. Commodity Price Volatility: Oil and gas asset profitability is highly sensitive to fluctuating commodity prices. The reserves report uses constant prices ($62/barrel for oil, $3.697/MCF for gas), which may not reflect future market realities and could lead to less favorable actual returns.
8. Optimistic Reserve Report Assumptions: The reserve estimates do not escalate operating or capital costs for inflation, nor do they account for potential environmental liabilities or title issues. This could make projections more favorable than reality.
9. No Growth Opportunities: With capital fully invested and no plans for new acquisitions, the Fund's future limits itself to optimizing its existing, and currently challenged, asset base.

Future Outlook

The Fund has shifted its strategy to a "harvest" mode, focusing on maximizing returns from its existing portfolio rather than expansion. The Manager, Ridgewood Energy Corporation, and its Investment Committee now focus entirely on developing and operating these existing assets.

The immediate future involves critical operational efforts: restoring production from the shut-in wells (#4 and #3) and completing planned recompletion operations for Wells #4, #5, and #2. These activities are essential for restoring and maintaining production from the Beta Project.

The long-term outlook centers on generating cash flow from these mature assets for distribution to interest holders. However, given projected losses from currently producing wells, the successful and profitable development of the Fund's undeveloped reserves is absolutely critical for the Fund's future and for recovering any portion of the initial investment.

Regulatory and Market Trends

The Bureau of Ocean Energy Management (BOEM) and the Outer Continental Shelf Lands Act (OCSLA) regulate the Fund's offshore operations. The Deepwater Royalty Relief Act remains a key regulatory benefit, though its advantages tie to commodity price thresholds. Broader market trends, including global commodity price volatility and the ongoing energy transition, pose long-term risks to oil and gas asset valuation and profitability.