10-K: Ridgewood Energy Q Fund Reports Full Year 2023 Results: Revenue Declines Amid Price Volatility

Ridgewood Energy Q Fund's 2023 annual report reveals a decrease in oil and gas revenue due to lower sales volumes and prices, despite steady production days.

Summary

• Ridgewood Energy Q Fund, LLC, primarily focused on acquiring interests in oil and natural gas properties in the Gulf of Mexico, reported its financial results for the year ended December 31, 2023.
• The Fund's primary investment objective is to generate cash flow for distribution to its shareholders.
• The Fund's capital has been fully invested, limiting future investment activities to existing projects.
• Oil and gas revenue decreased to $4.2 million in 2023 from $7.5 million in 2022, due to lower sales volumes and decreased oil and gas prices.
• The average oil price decreased from $91 per barrel in 2022 to $75 per barrel in 2023, and the average gas price decreased from $6.68 per mcf to $3.26 per mcf.
• Net income decreased from $4.1 million in 2022 to $1.5 million in 2023.
• Distributions to shareholders and the Manager totaled $3.6 million in 2023, compared to $5.9 million in 2022.
• The Fund's estimated capital commitments related to its oil and gas properties were $3.1 million as of December 31, 2023.
• The Fund expects cash flow from operations to be sufficient to cover its commitments and ongoing operations.
• Robert E. Swanson retired as Chief Executive Officer and Principal Executive Officer of the Fund, effective February 22, 2024, and Kathleen P. McSherry was appointed as the new CEO and PEO.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While the Fund expects to cover its commitments, the decrease in revenue and net income indicates a challenging year. The management changes also add a layer of uncertainty.

Positives

• The Fund expects cash flow from operations to be sufficient to cover its commitments and ongoing operations.
• The Fund did not experience any significant damage, shut-ins, or production stoppages due to hurricane activity in 2023.
• The Fund's disclosure controls and procedures are effective as of the end of the period covered by the report.
• The Fund's internal control over financial reporting is effective as of December 31, 2023.

Negatives

• Oil and gas revenue decreased by $3.3 million, from $7.5 million in 2022 to $4.2 million in 2023.
• The Fund's average oil price per barrel decreased from $91 in 2022 to $75 in 2023.
• The Fund's average gas price per mcf decreased from $6.68 in 2022 to $3.26 in 2023.
• Net income decreased from $4.1 million in 2022 to $1.5 million in 2023.
• Distributions to shareholders and the Manager totaled $3.6 million in 2023, compared to $5.9 million in 2022.

Risks

• The outlook for the oil and gas market in 2024 continues to be volatile.
• Changes in oil and natural gas commodity prices may significantly affect liquidity and expected operating results.
• The Fund's operations and cash flows may be significantly impacted by hurricanes and other inclement weather.
• The Fund is subject to extensive federal and state laws and regulations regarding oil and natural gas exploration, development, production, and transportation.
• The Fund shares liability for environmental impacts attributable to its operations.
• The Fund is exposed to credit losses through the sale of oil and natural gas to customers.

Future Outlook

The Fund expects cash flow from operations to be sufficient to cover its commitments and ongoing operations, but future results depend on oil and gas prices and production from the Beta Project.

Industry Context

The report reflects the challenges and volatility in the oil and gas industry, with fluctuating commodity prices impacting revenue and profitability. The Fund's performance is tied to the success of its existing projects, particularly the Beta Project, and its ability to manage costs and navigate regulatory requirements.

Comparison to Industry Standards

• It is difficult to compare Ridgewood Energy Q Fund, LLC to industry standards as it is a limited liability company with a specific investment strategy and not a publicly traded exploration and production company.
• However, the report mentions that the Manager has obtained what it believes to be adequate insurance for the funds that it manages to cover the risks associated with the funds passive investments, including those of the Fund, which is a common practice in the industry.
• The report also mentions that the Fund's environmental, health and safety risks are not materially different from those of comparable companies in the United States in the offshore oil and gas industry.

Management Changes

Related Party Transactions

• The Manager is entitled to receive 15% of the cash distributions from operations made by the Fund.
• The Fund utilizes Beta Sales and Transport, LLC, a wholly-owned subsidiary of the Manager, as an aggregator to facilitate the transportation and sale of oil and natural gas produced from the Beta Project.
• The Fund is party to a production handling, gathering and operating services agreement with Ridgewood Claiborne, LLC, a wholly-owned entity of Ridgewood Energy Oil & Gas Fund II, L.P.

Stakeholder Impact

• Shareholders will experience lower distributions compared to the previous year.
• The Fund's employees, who are employed by the Manager, may be affected by the management changes.
• The Fund's customers and suppliers may be affected by the changes in oil and gas production and prices.
• The Fund's creditors may be affected by the changes in the Fund's financial condition.

Next Steps

• The Fund will continue to manage its capital spending estimates within its expected cash flows to provide for the costs associated with the well recompletions for the Beta Project, as budgeted.
• The Fund will continue to monitor the oil and gas market and adjust its operations accordingly.
• The Fund will continue to comply with all applicable federal and state laws and regulations.

Key Dates